Agriculture After the Pandemic
I’ve published an essay — Agriculture After the Pandemic — on Project Syndicate, the World’s Opinion Page. You can access it here.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
South Africa agriculture jobs up in Q4, 2019
We don’t normally bombard you with emails (or posts, for those reading this online), but since our note this morning previewed South Africa’s primary agricultural jobs situation (see here), we deem it appropriate to provide an update. Data released this morning by Statistics South Africa shows that the country’s agricultural jobs were up 1% (or 5 000) from the third quarter of 2019 and up 4% (or 36 000) from the last quarter of 2018, estimated at 885 000.
The notable jobs gains were in the Western Cape, KwaZulu-Natal, Free State and Limpopo. This was largely in the horticulture and field crops and livestock subsectors.
We believe that the Western Cape, Limpopo and KwaZulu-Natal jobs were mainly in horticulture and field crops subsectors (specifically winter crops), while the livestock subsector job gains might have mainly been in the Free State. The Eastern Cape, Northern Cape, North West, Gauteng and Mpumalanga agricultural sectors registered job losses, but this was offset by improvements in other provinces. Hence, on balance, the country’s agricultural sector registered employment net gains from the previous quarter and the corresponding period in 2018.
We are generally optimistic about the near-term agricultural jobs outlook. The potential improvement in summer crops production, following an 8% expansion in area plantings, coupled with the expected increase in wine grapes production and other fruits could lead to an increase in employment, albeit some of this could be seasonal.
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It’s Jobs Day
We have important data this morning. Statistics South Africa will release its results of the Quarterly Labour Survey for the fourth quarter of 2019. To recap, the third-quarter data showed that South Africa’s primary agricultural employment jumped by 4.5% y/y from the corresponding period last year to 880 000, as illustrated in Exhibit 1 below.
This came as a surprise as the third quarter of each year is usually a quiet period on farms in most parts of the country. These jobs gains were mainly in the livestock, horticulture, field crops, as well as aquaculture subsector.
We think this could have largely been underpinned by the replanting in parts of the horticulture fields following a drought season that caused damage in the fields in provinces such as the Western and Eastern Cape. Other provinces that showed job gains are KwaZulu-Natal, Gauteng and Mpumalanga. Meanwhile, the Northern Cape, Free State, North West and Limpopo saw a reduction in agricultural employment.
Today’s numbers could show mild improvement or remain stable at levels around 880 000 jobs supported by the horticulture industry. While there has been an 8% y/y increase in South Africa’s area planted for summer crops, we doubt that this led to primary agricultural jobs gains in the fourth quarter of 2019 as plantings are typically through highly mechanized tractors that require minimal labour involvement. If anything, the summer crop growing areas could lead to jobs gains in the second quarter of the year which will be harvesting time.
Long-term view
South Africa’s agricultural sector has the potential to contribute to employment creation, as clearly shown in Chapter six of the National Development Plan. But this will require a combination of factors to materialize. These include a boost in agricultural productivity, an improvement in the rural investment climate, expansion of export markets, promotion of labour-intensive agriculture subsectors, investment in irrigation, and expansion of area farmed where possible.
Exhibit 1: South Africa’s primary agriculture employment
Source: Stats SA, Agbiz Research
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Thoughts on South Africa’s agricultural jobs data
I just went through Statistics South Africa’s Quarterly Labour Force Survey data for the third quarter of 2019. The primary agricultural numbers were a pleasant surprise, showing a 4.5% y/y uptick to 880 000. I say “surprise” because the third quarter of each year is usually a quiet period on farms in most parts of South Africa.
These jobs gains were mainly in the livestock, horticulture, field crops, as well as aquaculture subsector. I think this could have largely been underpinned by the replanting in parts of the horticulture fields following a drought season that caused damage in the fields in provinces such as the Western and Eastern Cape. Other provinces that showed job gains are KwaZulu-Natal, Gauteng and Mpumalanga. Meanwhile, the Northern Cape, Free State, North West and Limpopo saw a reduction in agricultural employment.
The question I have received thus far from people was whether this optimism will hold given the current drier weather conditions?
One thing to point out is that while it is currently dry across the country and summer crop plantings have been delayed somewhat, there are prospects for favourable weather conditions in the near -term, which should support agricultural activity and subsequent employment. The South African Weather Service forecasts above-normal rainfall between November 2019 and January 2020. Be that as it may, a recovery in weather conditions alone might not lead to notable job creation in agriculture that far outpaces the trends we have witnessed over the past few years, hovering around 850 000 jobs.
The broader policy questions should be: how to ensure that South Africa’s agriculture sector delivers to the promise of job creation?
This will require a combination of factors. These include a boost in agricultural productivity, an improvement in the rural investment climate, expansion of export markets, promotion of labour-intensive agriculture subsectors, and expansion of area farmed where possible.
Also, the underutilised land in the former homelands and some land reform farms will also need to be revitalised to see an increase in employment. As my colleagues and I at Agbiz, have consistently pointed out, the provinces containing former homelands that still have tracts of underutilised, arable land that can be prioritised for agricultural expansion are KwaZulu-Natal, the Eastern Cape and Limpopo. These provinces collectively have between 1.6 million to 1.8 million hectares of underutilised land, according to a 2015 study by McKinsey Global Institute.
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Is it true that SA youth doesn’t like farming because it’s not sexy?
It has become fashionable in conferences to say “let’s make agriculture sexy in order to attract the youth”. I get where the sentiment comes from, after all, Africa’s farmers are ageing with an average age of 60. Here in South Africa, that number is estimated at 62.
But I have two difficulties with supporting this statement.
First, I don’t believe that agriculture is necessarily supposed to be made sexy for young people to want to join the sector — it needs to be valuable. In other words, if agriculture can have a greater reward as other sectors of the economy, young people might want to join in.
Second, I haven’t done my homework on this to actually assess if young people are really uninterested in agriculture. But there is anecdotal evidence that there are a large number of young people out there with agriculture degrees and diplomas who struggle to get jobs in this sector, specifically in the case of South Africa. I often receive emails with CVs from graduates from the universities of Limpopo, KwaZulu-Natal, Fort Hare, North West, etc. in need of jobs within the agricultural sector.
Some agribusinesses and agriculturalists argue that vocational training institutions are not efficiently producing skills needed for agriculture today, and that might be part of the reason some young people are not finding work in this sector. This then calls for more alignment between the agricultural industry and training institutions.
These anecdotes contradict the view that “let’s make agriculture sexy to attract youth” which seems to suggest that there is the scarcity of labour or people to farm.
In the Agrekon Journal earlier this year, Luke Metelerkamp of Rhodes University, published a study which covered three provinces – KwaZulu-Natal, Limpopo and the Western Cape exploring this subject of “youth interest in farming”. The study concluded that the dominant notion that young people are turning their backs on farming seems to hold true, but not because of a lack of interest.
Young people interviewed in the study noted that “jobs in agriculture were either back-breaking and financially unappealing – at the subsistence level”.
Given these observations, I think those of us who are fortunate enough to be part of this sector should showcase opportunities and various possible careers within this sector so that people are not only exposed to the physically challenging jobs. Moreover, this could help young people to know where to knock for assistance and what to study that’s on-demand in the present moment.
The rise of technology use within agriculture can also play a critical role to ease the fears that agricultural jobs are back-breaking. (Yes, there are some jobs that might be physically demanding, but there are also services jobs that aren’t that way).
Moreover, it is important that the conversation also moves beyond actual primary production and more to the entire value chain. This is where potential job opportunities could also be created.
Overall, I think the conversation about youth in agriculture should rather be focused on ways to align them with potential opportunities in the sector rather than repeating the view that people have no interest in farming. The latter leads to the situation where people spend time trying to make the sector look “attractive” instead of showcasing possible opportunities in it for young people to make their decisions if this is their desired path to follow or not.
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What’s needed for South Africa’s agriculture to boost jobs?
I have been punting that agriculture could help boost employment in South Africa, but the latest jobs data are a reminder that fundamental change is essential.
Today, July 30, we learned that South Africa’s primary agricultural employment fell by 0.2% in the second quarter of 2019 from the corresponding period last year to 842 000, which is in line with the long-term trend. The subsectors that faced a notable reduction were mainly field crops, the game industry and forestry. In the case of field crops, the reduction in employment was unsurprising following a decline in activity in the fields on the back of a poor harvest in the 2018/19 season, all of which is underpinned by unfavourable weather conditions earlier in the season.
But the key question is; will there be a change in the current jobs’ trajectory?
The near-term agricultural jobs trajectory will mainly be influenced by weather conditions, and levels of investment in the agricultural sector. As best as I can tell, there are prospects for good weather conditions in the coming months which could support agricultural activity and subsequent employment. But this might not result in levels of employment which outpace the jobs trends we have witnessed over the past few years.
On an investment front, the outlook hinges on the broader policy direction of the agricultural sector, notably land reform and water rights. There are a number of developments on the land reform front at the moment, but the final policy direction will be an important determinant of the path that South Africa’s agricultural sector takes. The same is true for water policy, and infrastructure thereafter.
Even if we assume positive outcomes from the aforementioned factors in the coming months, the effects on jobs may be marginal. Fundamental change is needed to break away from the current trend, and to reach the agricultural job targets that are envisaged in the National Development Plan. By using the word – fundamental change – I am referring to (1) a need for a boost in agricultural productivity, (2) an improvement in rural investment climate, (3) expansion of export markets, (4) promotion of labour-intensive agriculture, and (5) expansion of area farmed where possible.
At a practical level, if the underutilised land in the former homelands, underperforming land-reform farms, and other parts of the country are not brought into full production with a key focus on labour-intensive subsectors, notable job creation in South Africa’s agriculture sector might not materialise.
Labour-intensive subsectors specifically refer to the horticulture and field crop subsectors which currently employ two-thirds of the primary agriculture labour force of 842 000. The other subsector – livestock – can also be prioritised, specifically in areas where environmental factors do not permit horticulture and field crops. This would all happen at a time where there is a growing demand for horticultural, and protein-rich diets in the global market which is underpinned by the changing consumer patterns towards healthier diets.
Moreover, global beef demand is also gathering steam, particularly driven by China. All this presents an opportunity for South Africa to partially address its twin challenges of rural unemployment and low economic growth.
The provinces containing former homelands that still have tracts of underutilised, arable land that can be prioritised for agricultural expansion are KwaZulu-Natal, the Eastern Cape and Limpopo. These provinces collectively have between 1.6 million to 1.8 million hectares of underutilised land, according to a 2015 study by McKinsey Global Institute.
Also, worth noting is that these particular provinces are characterised by higher levels of unemployment and poverty, which in my view, would make sense for the government to prioritise them for agricultural development in the near term. As noted above, the starting point for this process would be to articulate a clear policy framework on land reform and water rights, which will encourage investment in the agricultural sector. Concerted investments would be required for land preparations and provision of irrigation infrastructure, amongst other aspects, to unlocking growth and employment, and associated positive welfare effects.
The focus for provinces that already have extensive farming could be on ensuring that there are export markets for products being produced. Further, the ports infrastructure for delivering the agricultural produce to export markets should be part of the “fundamental change” to boost South Africa’s agricultural fortunes and jobs. This is specifically the case to, but not limited, the Western Cape. The province is a leading agricultural jobs creator, but for that to be sustained, there must be market access for the produce of the province.
Animal and plant health as key pillars of trade need consistent attention. The effects of animal health were felt earlier this year in the livestock sector, specifically in the wool and beef industries, where a lapse in biosecurity controls severely compromised the industries’ export potential.
Overall, the quest for boosting employment in South Africa’s agricultural sector will need various interventions. Fortunately, many of these are within the policymakers’ reach.
Written for Agbiz and the Daily Maverick.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
Agriculture can help SA raise a fine crop of jobs
Essay by Wandile Sihlobo and Sifiso Skenjana[i]
Now that the elections are behind us, the broader economic discussions are likely to remain focused on two crucial subjects – growth and jobs. In this, agriculture has a role to play and President Cyril Ramaphosa made this point clear in his 2019 state of the nation address.
One of the key reasons for increased emphasis on the role of agriculture is its potential to boost rural economic growth, and absorb unskilled and semi-skilled labour with a relatively high multiplier -the number of jobs created for every rand invested in the sector.
Unemployment in SA rose to 27.6% in the first quarter of 2019, with youth unemployment at a staggering 55.2%. Agriculture can make a substantial contribution to job creation in rural areas.
We have been punting potential agricultural employment for a while, with some pushback from a couple of analysts who view this sector as a non-starter when it comes to job creation. In their arguments, they typically raise the issue of the fourth industrial revolution, and the basic development theory view, which states that as nations develop, the relative role of agriculture, at least from a jobs perspective, diminishes as people move to manufacturing and services sectors.
Employment in agriculture in SA has fallen over time, from 1.6-million in the 1960s to the current 837,000 people, as shown in Figure 1 below. This decline in employment is due to farm consolidation and the adoption of advanced technology.
Figure 1: SA primary agricultural jobs
In our view, the key levers available to the president are a clear and articulate policy on land reform and water rights, a strategic and targeted subsector investment boost, agricultural finance and support for emerging farmers.
Clear and articulate policy frameworks on land reform and water rights not only encourage investment, but bring restorative justice while ensuring that underutilised land in the former homelands, and some land-reform farms, are brought into full production to boost growth and jobs.
From the land reform perspective, there is work underway through the Presidential Advisory Panel on Land Reform and Agriculture that should provide some ideas on striking a balance between economic growth and restorative justice.
In terms of water rights, there is a need to clarify the policy framework to deal with the issuance and security of water-use rights, incentives for the private sector to invest in water infrastructure and measures to improve water quality.
The state owns about 70% of the dam capacity in SA. Investment cannot come from the state alone but a clear policy framework will be required to incentivise private investments.
WWF SA expects water demand to increase by 32% by 2030 due to population growth and industrial development. The agriculture sector will thus face more competition for water allocations so the focus must be on improving the efficiency and security of supply.
It is increasingly important for robust policy frameworks to be in place with respect to water rights.
The unemployed are typically low skilled and some reside in provinces that have underutilised arable land – KwaZulu-Natal, the Eastern Cape and parts of Limpopo, where there are more than a million hectares of such land. The immediate focus should be on a policy environment that boosts the agricultural economy and provides jobs.
The decline in agricultural employment over the past couple of decades has not been evenly spread.
For example, the field crop and horticultural subsectors have seen an uptick in employment due to an expansion in the area planted. About two-thirds of SA’s agricultural jobs are now in these subsectors – which will have to be a priority for our next president.
A large number of agricultural enterprises are both under-insured and under-financed. Data from the South African Insurance Association suggests that penetration ratios for multi-crop insurance are as low as 17% of the planted area.
Limitations to deeper agricultural finance include lack of collateral in communal land, high transaction costs due to the remote nature of agricultural enterprises, and inadequate tools to price for and manage agricultural sector risks and often fragmented value chains, particularly among smallholder farmers.
Agrifinance support is important for food security and driving competition to ensure continued investment in the sector. It also creates growth opportunities for emerging farmers and industrialists, giving them tools and resources that will enable them to effectively participate in mainstream commercial value and supply chains.
All the proposals above need effective private- and public-sector participation for improving skills and making investments through joint-venture approaches to farming, as well as blended finance methods, among other programmes.
We cannot emphasise enough how the agricultural economy continues to have significant potential in SA and, as such, the new administration would do well to make it a critical aspect of its strategy for sustainable economic growth and much-needed employment creation.
*Written for and first published on Business Times on 19 May 2019.
[i] Sihlobo is chief economist of the Agricultural Business Chamber of SA (Agbiz). Skenjana is a financial economist and founder of Afra Consultants
Only an increase in area farmed would notably induce employment in SA agriculture
Having written a bit about the promise of employment creation in SA’s agricultural sector, I was, again, given a reality check by the Quarterly Labour Force Survey data for the first quarter of 2019. The data shows that SA’s primary agricultural employment fell 1% year-on-year to 837,000 due to reduced activity in field crops, livestock and forestry, all partly due to unfavourable weather conditions earlier in the year.
From a regional perspective, the provinces that faced notable declines were the Eastern Cape, Northern Cape, Free State, Limpopo and Mpumalanga. However, other provinces saw a marginal uptick.
The data reminded us that SA is still lagging behind its target of creating 1-million agricultural jobs by 2030, as envisaged in the national development plan and constantly advocated by policy makers. As 2030 draws nearer and the statistics continue to show no sign of improvement, the targets become increasingly difficult to attain.
As far as I can tell, if the under-utilised land in the former homelands, underperforming land reform farms, and other parts of the country are not brought into full production with a key focus on labour-intensive sub-sectors, meaningful job creation in agriculture might not materialise.
This especially pertains to the horticulture and field crop sub-sectors, which currently employ two thirds of the primary agriculture labour force of 837,000. The other sub-sector — livestock — can also be prioritised, specifically in areas where environmental factors do not permit horticultural or crop expansion. This would all happen at a time when there is a growing demand for horticultural and protein-rich diets in the global market, which is underpinned by changing consumer patterns towards healthier diets.
This presents an opportunity for SA to partially address its twin challenges of rural unemployment and low economic growth.
The provinces with former homelands that still have tracts of under-utilised arable land that can be prioritised for agricultural expansion are KwaZulu-Natal, the Eastern Cape and Limpopo. These provinces collectively have between 1.6-million to 1.8-million hectares of under-utilised land, according to a 2015 study by McKinsey Global Institute.
Also worth noting is that these particular provinces are characterised by higher levels of unemployment and poverty, so it would make sense for the government to prioritise them for agricultural development in the near term. The starting point for this process would be to articulate a clear policy framework on land reform and water rights, which will encourage investment in the agricultural sector.
Concerted investments would be required for land preparations and provision of irrigation infrastructure, among other aspects of unlocking growth and employment and associated positive welfare effects.
To close off with a near-term forecast, the second quarter of 2019 numbers might remain at levels lower than we saw in the second quarter of 2018 due to an expected reduction in grains and oilseed production. However, this dip could be slight as these industries are not as labour-intensive as the other sub-sectors of SA’s agriculture. Also, the expected annual decline in SA’s wine grape production could also have led to reduced activity in the vineyards.
So, no good news for agricultural jobs in the near term. Concerningly, the statistics are likely to continue being unfavourable as long as we continue to talk the talk on job creation, but fail to walk the walk and put policies in place that promote agricultural investment and growth in communal areas.
*Written for and first published on Business Day on 14 May 2019.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and the author of two books, “A Country of Two Agricultures: The Disparities, The Challenges, The Solutions” and “Finding Common Ground: Land, Equity and Agriculture“.
He is a Senior Lecturer Extraordinary at the Department of Agricultural Economics at Stellenbosch University.
Sihlobo is also a Visiting Research Fellow at the Wits School of Governance, University of the Witwatersrand, and a Research Associate at the Institute of Social and Economic Research (ISER) at Rhodes University.
Sihlobo was appointed as a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council in 2019 (and re-appointed in 2022), having served on the Presidential Expert Advisory Panel on Land Reform and Agriculture from 2018.
He is also a member of the Council of Statistics of South Africa (Stats SA) and a Commissioner at the International Trade Administration Commission of South Africa (ITAC).
Sihlobo is a columnist for Business Day, The Herald and Farmers Weekly magazine.
His weekly podcast, “Agricultural Market Viewpoint with Wandile Sihlobo“, is available on all podcast platforms.
He holds a Bachelor of Science degree in Agricultural Economics from the University of Fort Hare and a Master of Science degree in Agricultural Economics from Stellenbosch University.