by Wandile Sihlobo | Jan 29, 2023 | Agricultural Environment and Natural Resource
As the deepening energy crisis continues to present problems for different parts of the agricultural sector, another major challenge looms — a change in weather conditions from favourable rains to drier, hotter conditions. This would be the outcome if there is a switch from the prolonged period of the La Niña weather phenomenon to El Niño.
SA has had a good four seasons of La Niña-induced above-average rains from 2019/2020 to 2022/2023. These supported agriculture, leading to higher yields across various field crops, fruits, and vegetables. The livestock industry also benefited from improved grazing pasture.
Having four consecutive La Niña seasons was unusual. The typical cycle is two seasons of higher rainfall followed by normal to drier seasons. Excluding the current trend, the only other similar period in the recent past ran through 2007/2008, 2008/2009, and 2009/2010 production seasons.
Scientists at the International Research Institute for Climate & Society at Columbia University now warn of the likelihood of El Niño kicking in later this year. In its update of January 19 the institute stated that “the likelihood of El Niño remains low through May-July 2023 (44% chance), but becomes the dominant category after that with probabilities in the 53%-57% range”.
Such a weather phenomenon would bring below-normal rainfall and hotter temperatures in SA. This could resemble the bleak agricultural conditions witnessed during the most recent El Niño drought, in the 2015/2016 season, when the harvest of maize, a staple crop, dropped to 8.2-million tonnes, well below SA’s annual consumption level of 11.8-million tonnes. This shortfall necessitated imports of maize to supplement domestic needs.
Other field crops, fruits, vegetables and livestock also experienced severe losses. But if the El Niño is mild, crop declines could resemble the 2018-2019 episodes, in which the reduction in staple crops such as maize was not as aggressive. The total maize harvest that year was 11.8-million tonnes, in line with annual consumption. By comparison, in the past three seasons (excluding 2022/2023), SA’s maize harvest averaged 16.8-million tonnes and ensured that the country remained a net exporter of maize.
SA agriculture is mainly rain-fed, particularly field crops. Only about 20% of maize, 15% of soya bean, 34% of sugar cane and nearly half of wheat production is produced under irrigation. During droughts much of agriculture thus comes under immediate pressure.
In the case of fruit and vegetables, a sizeable area relies on irrigation. In the livestock sector, specifically dairy, irrigation is just as necessary. While the effect of lower rainfall is not as immediate, prolonged drought presents big risks to SA’s food security.
Even more worrying is that the agricultural regions that irrigate face continuous interruptions due to load-shedding. Organised agriculture and the department of agriculture, land reform & rural development are working on near- and long-term interventions to assist the sector.
One option that should receive serious consideration is incentives for self-generation, even if only covering a few critical parts of each business. The window for this option is limited, about eight months before we see the potential intensification of El Niño. But for regions that already irrigate, reducing load-shedding is the only option as farmers are seeing losses daily. The same extends to livestock, aquaculture (mainly abalone farms), dairy and poultry businesses, as well as various food, fibre and beverages value chain businesses.
The challenge of El Niño-induced drought will not be limited to SA but will be felt across Southern Africa. The last intense drought cycles led to increased food insecurity in the region. This is a particular risk if the upcoming summer season is dominated by drought.
Policymakers in the region should be aware of this creeping challenge and plan accordingly to support communities that heavily rely on agriculture.
Written for and first published on the Business Day.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jan 18, 2023 | Agricultural Environment and Natural Resource
As we start the new year, there is probably no issue more urgent than the worsening energy crisis for South Africa’s agriculture and agribusinesses.
Farmers that rely on irrigation have all expressed concerns that persistent loadshedding is negatively affecting production. In key field crops, roughly 20% of maize, 15% of soybean, 34% of sugarcane, and nearly half of the wheat production are produced under irrigation.
Fruits and vegetables also heavily rely on irrigation and thus face similar challenges. In red meat, poultry, piggery, wool, and dairy production, there are also concerns that loadshedding beyond stage two makes operations and planning challenging, as these industries all require continuous power for their usual activities.
Similarly, agribusinesses in various downstream processing activities, such as milling, bakeries, abattoirs, wine processing, packaging, and animal vaccine production, face similar challenges.
Exporting agribusinesses, especially those with products highly sensitive to delays, such as fruits, red meat, and wine, are also worried about the port activities, which fortunately haven’t been primarily affected.
The financial impact on agribusinesses or on food security more broadly is not yet clear and will be difficult to quantify.
There are also food security concerns as the effect of loadshedding will probably show in the volumes of products to be harvested/produced later in the coming months due to the time lag in agricultural production stages.
The other emerging concern is the impact on jobs if businesses are severely affected. There is a real danger that some farmers could lose their crops and that would impact the financial future of the farms and likely to have a negative impact on agricultural financiers.
Total exemption of the sector from loadshedding will be near impossible. Many food processing companies and farms are technically linked to other localities and cannot be easily insulated from loadshedding.
With Eskom’s challenges likely to be with us for some time, reducing reliance on Eskom will probably be a strategic business survival consideration for many businesses, although costly. Investing in alternative power sources will need to be prioritized, where financial resources permit. This alternative generation may not necessarily take a business “off the grid,” but ensure the continuity of crucial business activities during the cycle of loadshedding.
The financial commitments associated with this may be quite large and businesses may also encounter regulatory hurdles. These financial or regulatory limitations should be shared with the Department of Agriculture, Land Reform and Rural Development (DALRRD) so that they can help address them within their available resources and means.
One possible step DALLRD can consider is streamlining the application processes under the Subdivision of Agricultural Land Act (SALA) and Spatial Planning and Land Use Management Act (SPLUMA) to authorize the use of land for energy generation. Additionally, if the government could also consider subsidies for solar panels and battery storage on top of relaxing these requirements many farmers could possibly go off the grid and generate enough power for their systems.
In recent engagements with the private sector, the DALRRD clearly stated that it would explore any incentives for alternative power generation in the sector. Minister Thoko Didiza expressed deep concerns about the impact of loadshedding in agriculture, agribusinesses, and the broader food, fibre, and beverages sectors.
Against this backdrop, the DALRRD will this week set up a task team of industry players, energy experts, and government officials to explore possible near-term and long-term energy solutions for the sector. The task team route makes sense, given that the sector is wide and diverse, and this is a specialized matter that needs swift and focused intervention from experts on energy and sectoral matters.
The energy crisis matter is urgent and needs practical solutions, not an “academic” exercise. In the near term, while various business attempt to survive this challenge, the public-private sector solution will primarily come from this collaborative effort for the sector.
Away from the ongoing concerns about the energy crisis, agricultural conditions in the country are generally favourable, having benefitted from the rains of the past few months. Provided a near-term solution for the sector’s energy shortage is found, this could be another year of generally large agricultural harvests across all subsectors and possibly positive growth (from the contraction we estimate for 2022).
Still, given the large-scale nature of areas that depend on irrigation and some that rely on efficient ports and processing facilities, uncertainty is high. The interventions to be made by both government and private sector to the energy crisis will be a key determinant of the sector’s performance for 2023.
Other factors beyond our control, such as the weather, have been positive for the first part of the year. Still, the heatwave of the moment requires irrigation in various areas to sustain the crops and orchards in good condition.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jan 16, 2023 | Agricultural Environment and Natural Resource
South Africa’s agriculture remains an important sector of the economy and holds great potential to reduce poverty. It’s also central to the political economy of the country, as evident in the governing African National Congress’s (ANC) recent policy documents.
The ANC acknowledges that agriculture:
holds the potential to uplift many poor South Africans out of poverty through increased food production, vibrant economic activity, and job creation.
This is not a misplaced view. There is compelling evidence that, on average, growth in agriculture is more poverty-reducing than an equivalent amount of growth outside agriculture. This brings home the need to invest in and expand agricultural production, particularly for the benefit of poor rural communities.
This is a view that many have held since the publication of South Africa’s National Development Plan in 2012. The plan argued for the expansion of agricultural production and agro-processing and held up the prospect of nearly a million jobs that could be created.
But year after year, challenges have distracted the country from its agricultural expansion goals.
The year 2023 will be no different. There are six key themes that are likely to underpin the sector, particularly in the first half of this year.
These are:
- the impact of energy shortages and associated costs to businesses and consumers, after the severest power outages the country has ever seen
- the expansion of exports
- land reform
- the fallout from collapsing local administrations
- lack of progress on key regulations
- the financing of the sector.
Unless these challenges are addressed, the country’s agricultural sector won’t achieve the growth and job creation prospects it’s capable of.
The impact of power cuts
The country can expect intensified discussion about the impact of energy shortages on agriculture, food, fibre, and beverages production.
South Africa’s persistent power cuts are a significant challenge across the economy. At the end of 2022, the South African Reserve Bank highlighted the risks that persistent power cuts represent to the growth prospects of the country’s economy in 2023.
The agricultural sector and food producers have not always been as vocal as, for example, the mining industry, about the impact on their businesses. This is likely to change this year. Power outages have started to disrupt the production of even essential food items This includes potato chips processing, milling, and poultry meat processing.
At primary production, farmers using irrigation systems face production difficulties in the current environment.
And there are disruptions across a range of food value chains. Importantly, this also brings extra costs to food companies and farmers, some of which could be transferred to the consumer over time. Consumer food price inflation is already elevated, estimated to have averaged around 9% in 2022 (from 6,5% in 2021), driven mainly by global agricultural commodity challenges.
Export expansion
Expect a major focus on the need for the expansion of agricultural export markets.
South Africa’s agricultural sector is export-oriented, exporting roughly half its products by value. Organised agriculture groups are pushing to expand exports.
This is not a new discussion, but it is likely to gain momentum in 2023 as the growth in domestic production necessitates that South Africa reaches new markets. The priority countries should be China, South Korea, Japan, the USA, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines, and Bangladesh. All have sizeable populations and large imports of agricultural products, specifically fruits, wine, beef, and grains.
Land reform
Land reform will be back at the top of the agricultural agenda as the drive for the inclusion of black farmers in the sector is highlighted in the Agriculture and Agro-processing Master Plan.
But the discussion is likely to focus on redistribution (rather than land restitution and tenure). The focus could be on the launch of the Agricultural Development and Land Reform Agency. For much of 2021 and 2022, the agency was mentioned on various occasions by South African president Cyril Ramaphosa and the minister of agriculture, Thoko Didiza.
Working with the private sector and redistributing some state-owned land, the agency is expected to accelerate land redistribution.
Deteriorating municipalities
The threat of deteriorating municipal service delivery, corruption in public offices, and the failures in the network industries such as roads, rail, water, electricity, and ports have occupied agribusiness leaders for some time.
These inefficiencies have:
- increased the cost of doing business
- taken investment away from productive agribusiness activities to maintaining roads and other infrastructure
- constrained expansion, and
- made conditions even more challenging for new entrants.
This year, the country’s organised agriculture groupings are likely to be more vocal about these challenges as they continue to constrain the agricultural sector expansion and make conditions even more challenging for new entrants.
Slow progress in fixing regulations
There are likely to be signs of growing unease about the slow progress in agricultural regulations.
The country’s agricultural sector faces regulatory constraints, such as the dysfunctional State Veterinary Service. This dysfunction negatively affects the production of key vaccines. There is also a need to modernise the Fertilizers, Farm Feeds, Seeds, and Remedies Act 36 of 1947. This is key in enabling the importation and registration of key agro-chemicals that are essential for boosting productivity of the agricultural sector.
For an extended period, South Africa embraced science and led the continent in agricultural productivity, benefiting from the adoption of critical agrochemicals, seeds, and livestock remedies.
But there’s been a drift away from this positive path. The country now lags behind its competitors due to delays and large backlogs in the office of the Registrar of Agricultural remedy. The result has been that crucial productivity-enhancing inputs haven’t been released to the agricultural industry.
The failures in national vaccine production also remain an issue.
The pressure will intensify to resolve all of these issues, especially as they are part of the legislative points the Agriculture and Agro-processing Master Plan should address. The plan seeks to address key hindrances to growth at a commodity level. Notably, the master plan is a social compact approach. It has already been given the support of major agricultural private sector role-players.
Finance
The need for agricultural finance, particularly developmental finance for new farmers, hasn’t been given enough attention.
At the end of 2022, the focus was on the blended finance instrument by the Department of Agriculture, Land Reform and Rural Development, and the Land Bank. The instrument will contribute positively to the sector’s growth and to serving the needs of some new farmers.
In 2023, there will be a drive for the Department of Agriculture, Land Reform, and Rural Development to broaden the blended finance instrument to accommodate more financial institutions and increase its scale to reach more farmers.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jan 14, 2023 | Agricultural Environment and Natural Resource
Written for and first appeared on Business Day.
The interlinked problems of poverty, unemployment, and weak economic activity continue to plague rural towns and communities in SA. However, the two industries that could help ease some of these challenges — agriculture and tourism — face various constraints that limit their growth potential.
Beyond the big topics of ambiguous land reform and international trade in the case of agriculture, the everyday challenge for farmers, agribusinesses, and tourism entities is the dire state of local road networks, deteriorating water infrastructure, and high crime levels.
Many people, myself included, have tried to keep this issue at forefront of public policy discourse over the past two years. Food and beverage group Clover’s decision in 2021 to move its cheese production from Lichtenburg in the North West to an existing plant outside Durban in KwaZulu-Natal as a result of ongoing poor service delivery, brought to light the real economic consequences of these challenges. The company had provided more than 400 jobs in Lichtenburg and there were other positive economic spin-offs for the community.
There are other well-publicized cases, including Astral in the Lekwa Municipality, where the poultry-producing company lost millions of rand because of the municipality’s failure to provide reliable supplies of water and electricity. In my home province, the Eastern Cape, dairy-producing organizations such as Amadlelo Agri and others are struggling to move their fresh milk to market because of the dire state of the roads, especially after recent heavy rains. They also face the challenges of poor maintenance of water infrastructure.
In the case of tourism, there have been several recent instances of people canceling trips to Coffee Bay, Centane, and Mbotyi in the Eastern Cape because of the poor state of the roads. The province has one of the country’s highest rates of unemployment and poverty, and one would expect local authorities to pursue any economic opportunity that addresses these hardships. But there is no evidence of any sense of urgency.
Improving those roads would have brought many more holidaymakers to these coastal towns and benefited small businesses. The farmers in the regions would also connect more efficiently with buyers in the cities.
I cannot forget an instance in July 2022 when an elderly woman from one of the villages in Dutywa, a small town in Mbhashe local municipality, called me. She had 300 bags (at 40kg each) of good-quality yellow maize and needed a way to sell it to cover her household needs. I made several calls to potential buyers and found one in Mthatha, a town roughly 86km away. But the transaction never went through after the buyer realized the road to the woman’s village was horrible, and his truck wouldn’t get there easily.
With the loss of potential income, it is difficult to imagine how this elderly woman can continue her farming activities at the scale she did in 2022; not because the weather conditions are not favourable or a lack of knowledge or ability on her part, but because it is impossible to get the product to market.
The department of agriculture, land reform & rural development can do what it will to distribute farming inputs and vouchers for inputs to improve agricultural activity. But its interventions won’t resolve the challenges of poverty, unemployment, and low economic activity if basic infrastructure continues to crumble.
Far too many provincial governments and local municipalities are failing to execute the broad national vision of economic reconstruction and growth because they aren’t doing the basics. That requires intense focus in 2023 to get SA in better shape and ease the economic pain in rural areas.
Agriculture and tourism are the future, but they require supportive infrastructure, especially at the municipal level.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jan 2, 2023 | Agricultural Environment and Natural Resource
I have previously emphasised the importance of accurate data in the South African agricultural sector to help inform decisions – from an investment, marketing, or policy perspective. In this blog post, I will focus on the less discussed but essential data to observe: sheep slaughtering in South Africa.
My colleague at Stellenbosch University’s Department of Agricultural Economics, Professor Johann Kirsten, recently completed an exciting analysis of the data linked to the statutory levy in the red meat industry. An important point to remember before I proceed is that every animal that gets slaughtered carries a levy amount paid to the red meat industry organisations.
So, Professor Kirsten’s analyses focused on the sheep meat industry, and we can extract from his work the following facts on this vital industry.
How many sheep are slaughtered in South Africa annually?
Based on the statistics for the levy years – November to October from 2015/16 to 2020/21, the total number of sheep slaughtered per annum varies between 4 million to 5 million head. The annual average between November 2015 and October 2021 is 4,8 million, and the monthly average from November 2015 to September 2022 is 398 000.
The number of sheep slaughtered dropped in the last three years due to the devastating drought in the Karoo region and the impact of Covid-19. This dropped from 5 431 000 in 2015/16 to 4 361 000 in 2020/21. These sheep numbers include ewes, rams, and lambs, with lambs usually around 80% of the total. But in the Karoo region, the share of lamb slaughters has recently dropped to 65% of all slaughtered sheep.
Where are most sheep slaughtered?
Almost a third (32%) of all sheep slaughtered in South Africa are slaughtered in the Northern Cape. In the 2015-2017 period, it was as high as 40% but declined to 25% in the last year or two because of the drought. The three provinces that make up the Karoo region – Eastern Cape, Western Cape, and Northern Cape jointly account for 64% of all sheep slaughtered in South Africa. If we take the data from the abattoirs in these provinces’ Karoo region, then around a quarter (25%) originate from the Karoo region.
What was the impact of the recent drought on monthly sheep slaughter numbers in the Karoo?
Taking the data from all 14 major abattoirs in the Karoo, we can identify the impact through the decline of the monthly slaughter numbers in the Karoo. Essentially, the Karoo abattoirs have faced financial difficulties, especially in the past three years.
NB: This blog post benefited from the work of Prof Johann Kirsten of Stellenbosch University.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Dec 14, 2022 | Agricultural Environment and Natural Resource
We are nearing the end of a challenging year in South Africa’s agriculture. The sector’s gross value added will likely show a mild contraction when the data for the entire year are published by March next year. This would be a notable shift from two consecutive years of solid growth with the sector having expanded by 14,9% y/y in 2020 and 8,8% y/y in 2021.
Mild declines in critical crop harvests such as maize, production challenges in the sugar industry, trade friction in fruits, vegetables, beef and wool, as well as widespread foot and mouth disease weighed on the sector’s performance this year.
In a slightly more technical sense, the strong growth in the last two years has created an exceptionally high base, setting the ground for some pullback. Therefore, despite the expected moderate decline in 2022, it is important to note that overall activity has remained strong and the sector maintained its core contribution of improving national food security and job creation.
On the food security front, South Africa’s ranking in The Economist’s Global Food Security Index has improved. This Index ranks South Africa at 59 out of 113 countries, improving from the 70th position in 2021. This places South Africa as the most secure food in Africa, followed by Tunisia, ranked 62nd. This improvement is commendable.
When looking at the Index scoring’s technical position, it becomes clear why South Africa’s food security conditions have improved, as the “headline” ranking shows. Notably, South Africa’s progress in the Global Food Security Index is not merely because other countries have regressed notably since the start of the Russia-Ukraine war, which increased global food prices.
South Africa’s scoring came in at 61,4 for 2022, a notable improvement from 57,8 in 2021. In the four subindices that comprise the Global Food Security Index — namely; (1) food affordability, (2) food availability, (3) food quality and safety, and (4) sustainability and adaption – there was a deterioration only in food affordability subindex, while the rest improved.
Regarding jobs, South Africa’s primary agriculture had 873 000 people employed by the third quarter of 2022, up 5% y/y. Notably, this is well above the long-term agricultural employment of 780 000. As with the previous quarter, the increased farm activity in some vegetables, fruits and field crops sustained robust employment. This speaks to the sector’s resilience amid many domestic and global economic and geopolitical challenges in 2022.
The export revenue from the sector also remains encouraging, despite the trade frictions South Africa experienced with its citrus in the EU, wool in China and vegetables in Botswana and Namibia. For example, in the data we have for the first eight months of this year, South Africa’s agricultural exports amounted to US$8,9 Billion, up by 6% from the first eight months of 2021.
The generally higher commodity prices have also contributed to this increase in export values. In these months, the African continent and Europe remained vital markets, accounting for two-thirds of total export earnings. Citrus, maize, nuts, wine, sugar, apples and pears, and grapes were among the key exports, especially in the latter months under consideration.
There have also been important policy developments and programmes that came into effect this year, which, if implemented effectively, could boost long-term growth for the sector. For example, in May, the industry role-players together with the Department of Agriculture, Land Reform and Rural Development (DALRRD) launched the Agriculture and Agro-processing Master Plan. This is a socio-compact programme which requires a collective effort of all agriculture role-players to succeed.
Importantly, the programme was co-created by all partners, which means it enjoys a shared vision for the sector’s growth agenda. The Master Plan reflects on key growth-constraining factors of the sector and further proposes solutions for sectoral cross-cutting issues and commodity-oriented.
Meanwhile, the launch of the Blended Finance instrument between the DALRRD and Land Bank was an important step that will support the implementation of the Master Plan. The industry wishes for this Blended Finance instrument to be broadened and increase the support of other financial institutions. This will likely occur in the coming months as there has been enormous progress in the programme design.
The one area where there has been minimal progress and where expectations were high at the start of the year is with the launch of the Agricultural Development and Land Reform Agency, which we believe could help to accelerate the redistribution pillar of the land reform programme.
The Agency was mentioned on various occasions by South African President Cyril Ramaphosa and Minister of Agriculture, Land Reform and Rural Development Thoko Didiza. We understand that there has been considerable progress in structuring this Agency, and when launched, it could play an important role in land reform. This will be an additional instrument to supporting the Master Plan.
All this has been achieved while South Africa’s agriculture continues to face a range of exogenous challenges. Most of these we discussed in previous versions of this note and these include poorly functioning network industries – roads, rail, ports, water, and electricity- and service delivery problems in municipalities, leading to an increase in business costs.
Moreover, there is a need to expand export markets beyond the country’s traditional markets. The priority countries should be China, South Korea, Japan, the USA, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines and Bangladesh. These countries have a sizable population and large imports of agricultural products, specifically fruits, wine, beef and grains. These countries are already on the radar of the South African authorities.
In sum, the year 2022 presented various challenges to the sector. Still, the resilience ensured that the core objectives, such as food security and job creation, are met amid the intensified geopolitical and rising input costs largely outside South Africa’s control. The 2022/23 summer season presents prospects of a La Niña, which is already evident from the recent heavy rains across South Africa.
These favourable weather conditions (assuming they won’t be destructive) combined with farmers’ drive to increase plantings, imply that 2023 could be a year of recovery from a potential contraction in 2022. Importantly, accelerated implementation of the programmes we highlight above in 2023 would be an even more important catalyst for the sector’s long-term growth. The government must lead the implementation role, complemented by all agriculture role players, as South Africa focuses on a socio-compact approach to agricultural expansion and development.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Dec 9, 2022 | Agricultural Environment and Natural Resource
South Africa’s agricultural sector continues to show some signs of resilience. With all the challenges this year – from tough production conditions in grains and oilseeds, disease outbreaks in livestock, and trade barriers in horticulture – we still see increasing job opportunities.
In the third quarter of this year, there were 873 000 people in primary agriculture. This is up by 5% year-on-year (while down marginally by 0,1 quarterly). Notably, this is well above the long-term agricultural employment of 780 000. As with the previous quarter, the increased farm activity in some vegetables, fruits and field crops sustained robust employment.
Still, the picture is not all rosy. The livestock, animal husbandry, forestry, and related services subsectors shaved jobs during this period under review. The decline in employment in livestock was expected as the subsector faces the spread of foot-and-mouth disease, which has led to a temporary suspension of exports and a reduction in activity in numerous businesses, thus weighing on farmers’ finances.
Furthermore, the higher feed cost is an additional challenge for the livestock industry. This decline in agricultural jobs was mainly in the North West and Mpumalanga. Nevertheless, the reduction in the business activity in the subsectors mentioned above was compensated by the increasing work opportunities in horticulture and field crops. Thus, other provinces registered positive growth from the third quarter of 2021.
The data for the last quarter of the year will likely present a roughly unchanged view from the third quarter primary agricultural jobs numbers. The horticulture and field crops subsector probably will maintain the current workforce, although input costs have risen notably.
Farmers are optimistic about the 2022/23 production season, and the rains since the start of the quarter are broadly positive for the sector, notwithstanding the planting delays in the grains and oilseeds regions and the destruction of some banana and macadamia fields in Mpumalanga because of excessive rains. The business challenges that the Tongaat Hulett financial difficulties brought to the sugarcane industry will possibly not reflect the agricultural jobs numbers for now.
The agricultural jobs were improved while South Africa’s agriculture continues to face a range of exogenous challenges. I have discussed some of our challenges in these pages, including poorly functioning network industries – roads, rail, ports, water, and electricity- and service delivery problems in municipalities, leading to increased business costs. Resolving these challenges will provide momentum for the long-term growth of agriculture and contribute positively to job creation.
We should also remain mindful that South Africa’s agricultural sector is export-oriented. This means that the expansion in the export markets should support a possible increase in domestic production. This view is widely shared by the agricultural sector role players who have argued for a need to expand export markets beyond the country’s traditional markets. The priority countries should be China, South Korea, Japan, the USA, Vietnam, Taiwan, India, Saudi Arabia, Mexico, the Philippines and Bangladesh. These countries have a sizable population and large imports of agricultural products, specifically fruits, wine, beef and grains. These countries are already on the radar of the South African authorities.
Beyond the export markets and the reforms in the network industries, we also need to ensure that there is progress and success in the land reform programme, an integral part of our agricultural growth agenda. Here the promising idea that has recently been tabled is the Agricultural Development and Land Reform Agency, which I believe could help to accelerate the redistribution pillar of the land reform programme.
The Agency was mentioned on various occasions by South African President Cyril Ramaphosa and Minister of Agriculture, Land Reform and Rural Development Thoko Didiza. I understand that there has been considerable progress in structuring this Agency, and when launched, it could play an important role in land reform, specifically the land redistribution pillar. Ideally, this Agency will have private sector and public partnerships for the good of the new entrant farmers.
In sum, the year 2022 presented various challenges to the sector. Still, the resilience ensured that the core objectives, such as food security and job creation, were met amid the intensified geopolitical and rising input costs largely outside South Africa’s control. The 2022/23 summer season presents prospects of a La Niña, which is already evident from the recent heavy rains across South Africa.
These favourable weather conditions (assuming they won’t be destructive) and farmers’ drive to increase plantings imply that 2023 could be a year of recovery from a potential contraction in 2022. Importantly, accelerated implementation of the much-needed reforms I highlight above in 2023 would be an even more important catalyst for the sector’s long-term growth and job creation. The government must lead the implementation role in programmes such as the Agriculture and Agro-processing Master Plan, complemented by all agriculture role players.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Nov 5, 2022 | Agricultural Environment and Natural Resource
The challenges agriculture and agribusiness stakeholders face are the same across SA. I recently spent time with agribusinesses and farmers in the Eastern Cape, along with colleagues at the Agricultural Business Chamber of SA (Agbiz).
The Eastern Cape is an important agricultural province, accounting for about 6% of the sector’s annual gross value added, roughly the same as Limpopo, North West, and Gauteng.
The broad challenges that continue to weigh on agribusiness leaders’ minds in this province are the threat of deteriorating municipal service delivery, corruption in public offices, and failures in the network industries (roads, rail, water, electricity, and ports).
These inefficiencies lead to increasing costs of doing business in the province and taking investment away from productive agribusiness activities to maintaining roads and other infrastructure.
Beyond these challenges are regulatory constraints such as the dysfunctional State Veterinary Service and the need to modernize the Fertilisers, Farm Feeds, Agricultural Remedies, and Stock Remedies Act.
For an extended period, SA embraced science and led the continent in agricultural productivity, benefiting from the adoption of critical agrochemicals, seeds, and livestock remedies.
However, the country is drifting from this positive path. We lag behind our competitors due to delays and large backlogs in the registrar’s office, resulting in crucial productivity-enhancing inputs not being released to the agricultural industry. The failures in national vaccine production also remain an issue, and the livestock industry is again at risk as the rainy season starts.
The agribusinesses we engaged with also highlighted the need for SA to expand export markets to accommodate the growing fruit and livestock output.
Moreover, there needs to be an improvement of relations between industry and shipping companies so that the Eastern Cape ports can also receive prominence in services. There have been occasions where the province’s ports have struggled to get shipping lines essential for the movement of agricultural products to export markets.
The need for agricultural finance, particularly developmental finance for the new entrant farmers and the need to build trust and accountability, as well as implementation, monitoring and evaluation of various sector plans, was also highlighted in the engagements.
Interventions
These challenges are cross-cutting and are not limited to the functions and responsibilities of the department of agriculture, land reform, and rural development. This means the form of engagement with the government will also need to be broad and include the likes of the departments of public works and transport, among others.
The agribusinesses have been engaged in discussions on these issues through various national platforms and direct engagements with Transnet and other stakeholders. 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, among others. Admittedly, the push for export growth has become even more urgent as agricultural output consistently improves and the country has limited capacity to absorb new produce.
As I have pointed out previously on these pages, SA exports half its products in value terms. Therefore, government and industry efforts to boost domestic production should be underscored by the expansion of export markets. Japan, China, India, Saudi Arabia, Bangladesh, the Philippines, and South Korea remain the key markets in which SA agribusinesses are interested in expanding their presence.
I continue to highlight these markets to the relevant government departments and the presidency. The presence of agricultural role players in the recent SA-Saudi Arabia engagement stands as an example of what we need for cooperation and championing “SA Inc” agricultural products as a country. This should now be followed by technical government engagements to open the path for exports of SA agricultural products.
Regarding agricultural finance, the focus was on the recently launched blended finance instrument by the department of agriculture, land reform and rural development, and the Land Bank. This is a necessary product and will positively contribute to the sector’s growth and to servicing the needs of some new entrant farmers.
Moreover, the department has drafted the blended finance instrument for the broader financial service and agribusiness sector. It will be an additional pillar that further cushions the sector and provide a necessary resource for expansion.
Overall, the challenges agribusinesses and farmers face across SA are similar. These are also well understood by both government and various industry stakeholders. SA needs a plan of action, particularly on improving efficiencies in the network industries, municipality delivery, rooting out corruption, and legislative reforms within the department.
The Agriculture & Agro-processing Master Plan lays out the policy framework that provides a comprehensive view of the sector’s challenges and proposes some solutions. It is not a perfect plan, but it could improve the sector’s operational conditions if implemented effectively and efficiently by all stakeholders.
As agriculture is one of the sectors that will help grow the SA economy, there needs to be increased attention to the reforms necessary to unlock inclusive growth and job creation.
Written for and first appeared on Business Day.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
