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
by Wandile Sihlobo | Oct 2, 2022 | Agricultural Environment and Natural Resource
Written for and first appeared in Business Day.
It is a sunny Wednesday morning and I am visiting the Elsenburg Agricultural Training Institute just outside Stellenbosch. As I approach this pristine facility, which was founded in the closing years of the 19th century as the first centre for agricultural training in Africa, I am already impressed by how well kept the campus is.
As I park I’m warmly welcomed by members of management Darryl Jacobs and Hayley Rodkin. We greet and remark on this historic institute’s excellent infrastructure and maintenance. Not long after the pleasantries the conversation shifts to the state of agricultural colleges across the country.
The previous weekend the investigative journalism TV programme Carte Blanche aired an episode showcasing the deteriorating condition of SA’s agricultural colleges, an indictment in a country where agriculture still occupies an important place in the economy and has a vital role to play in ensuring food security both domestically and across the continent.
Jacobs acknowledges the difficulties faced by agricultural colleges in SA, but tempers my anxiety with a positive tone. He is, like many of us engaged in the sector, frustrated by the declining quality of infrastructure and the neglect. But he is quick to emphasise that there are still hard-working and committed staff and students who are passionate about agriculture.
Jacobs would have preferred Carte Blanche to show both sides and use this moment to assess how the failing colleges could learn from the functioning ones, such as Elsenburg, and even collaborate to exchange lessons on best practices. I nod.
After our absorbing exchange at the threshold of the lecture hall we made our way to where I was to deliver my address on the state of the SA agricultural economy and policy direction. As we entered we were greeted by a packed hall of third-year students, diverse in their race, gender and backgrounds and united by their hunger for knowledge.
There was a distinct sense of idealism beaming off their faces, which gave me hope that agriculture in SA does indeed have a future. This enthused me to walk this group of final-year students through the challenges they will be required to solve when they enter the world of work in 2023. They were fully engaged.
I left the college feeling optimistic, and at the same time burdened by the vast unevenness in the state of agriculture colleges. This is an area the government has neglected. Yet it is a vital investment in this important sector of the economy. We need to see more agriculture colleges like Elsenburg in other provinces.
The day after my visit to Stellenbosch I landed at the sunny Bloemfontein airport and made my way to Peritum Agri Institute, a private agricultural college. My Agbiz colleagues and I were to meet with agribusinesses to discuss policy matters. The infrastructure was visibly new, though Peritum Agri Institute is far smaller than the historic Elsenburg.
The similarity was in the enthusiasm of its leadership. We arrived just more than an hour before the meeting, and the administration took that opportunity to give us a mini-tour of the facility. The environment was clean and well-organised. The institute is located close to some of the country’s most successful agribusinesses, which means the students get theoretical training and then have an opportunity to apply the skills.
Similar to the experience I had at Elsenburg, I left the Peritum facility hoping we can replicate this excellence far and wide in the country. But the question in my head is how one can recruit enthusiastic leadership to turn the failing colleges around, improve spending practices to help modernise infrastructure, and attract high-quality lecturers.
Failing to do this would be failing the young people of this country who are so passionate about agriculture.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Sep 27, 2022 | Agricultural Environment and Natural Resource
While some farmers in the grains and oilseeds industry benefited from the unusually long period of large yields and higher prices, higher input costs since the start of 2020 have limited the benefits.
For farmers in the horticulture industry, where commodity prices did not increase as much as in grains, the higher input costs were an even heavier burden. These price increases were mainly in agrochemicals (herbicides, fungicides, insecticides), fertilizers and fuel.
Various factors caused the price increases, but the main ones were the disruptions in industrial production when the covid-19 pandemic started, protracted supply chain bottlenecks, higher shipping costs, China’s decision to limit fertilizer exports, and more recently, the Russia-Ukraine war. In the months after the war started, prices of some products increased to record highs.
Fortunately, prices have come off in recent months from those highs. For example, at the beginning of September, the global fertilizer price index is down by 18% compared with April 2022 highs. Despite the recent moderation, current price levels are about 60% higher than a year ago. The market is still far from adjusting to levels before covid-19 and the Russia-Ukraine war. Similarly, Brent crude prices have come off the recent highs, averaging US$93 per barrel in the first half of this month. Still, these levels are 31% higher than a year ago. We see similar price dynamics in the agrochemicals, which have softened over the past few months, but are roughly 20% more than a year ago.
This is a theme of this week’s podcast, which you can listen to by clicking here. This is available on all podcast platforms – Agricultural Market Viewpoint with Wandile Sihlobo.
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Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Aug 29, 2022 | Agricultural Environment and Natural Resource
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.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
