South Africa’s agriculture sector has been the mainstay of economic growth even at the height of Covid-19. Its underbelly, however, is its dualism and lack of inclusiveness. The former homelands are left behind. They occupy the periphery of agricultural progress.
The European Union (EU) is the second most important market for South Africa’s agricultural products, accounting for 27% of the country’s total agricultural exports. Despite South Africa transitioning from the Trade Development Cooperation Agreement (TDCA) to the Economic Partnership Agreement (EPA) to secure continued and improved market access in the EU, a new set of regulations under the EU Green Deal and its Farm to Fork Strategy are set to impose additional compliance costs that will likely negate the benefits of existing preferential trade arrangements. We present a set of challenges, opportunities, and risks that both government and the private sector need to address if South Africa aims to increase agricultural exports to the EU.
South Africa’s agricultural sector is not in an entirely flowery state. Rising input costs for all farmers will squeeze profit margins in the 2021/2022 period. The only saving grace for those in field crops and horticulture would be if global commodity prices remain elevated as expected, though possibly lower than the levels at the start of 2021.
We are still in the early days as the planting activity has recently started in the eastern and central regions of South Africa. Still, the higher tractor sales, favourable weather outlook for the season and the farmers’ optimism through the intentions to plant data compel us to believe that South Africa could have yet another good crop in the 2021/22 production season.
The focus on South Africa’s agriculture is on the rebuilding phase, and at the national level the growth strategy revolves around the agriculture and agro-processing master plan, which has been in the works for more than a year. Drafting the plan has taken a social compact approach, with business, labour and the government all well represented. However, the question people ask whenever one raises the master plan as our saving grace to boost growth in agriculture is what will make this time different and encourage implementation.
SA’s agricultural economy growth prospects are positive in the near term. Still, the long-term growth prospects depend on the pace and commitment to implementing reforms such as the Agriculture and Agroprocessing Master Plan, along with various land reform suggestions in the advisory panel’s report, among others.
We have had a fair share of depressing news from various sectors of the economy, but the light that agriculture presents deserves some attention. There are favourable economic conditions in this sector, and these are clear from recent data releases on the gross value added, sentiment indicators, and farm machinery expenditure.
I recently joined CNN in a feature covering South Africa’s blueberries industry.
Wandile Sihlobo is the Chief Economist of the Agricultural Business Chamber of South Africa (Agbiz) and the author of “Finding Common Ground: Land, Equity, and Agriculture.”
Sihlobo is Senior Lecturer Extraordinary at the Department of Agricultural Economics at Stellenbosch University.
He is also a Visiting Research Fellow at the Wits School of Governance, University of the Witwatersrand.
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.
Sihlobo was appointed as a member of President Cyril Ramaphosa’s Presidential Economic Advisory Council in 2019 after serving on the Presidential Expert Advisory Panel on Land Reform and Agriculture between 2018 and 2019.
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 and Farmers Weekly magazine.