South Africa’s good news in 2021 is in the agricultural sector

South Africa’s good news in 2021 is in the agricultural sector

I’ve recently published a lengthy piece summarising South Africa’s agricultural performance in 2021 on Econ3x3.

Here is an abstract of the essay:

“The year 2021 has ended positively for South Africa’s agricultural sector. Farmers experienced a unique season characterized by bumper yields, and higher agricultural commodity prices, particularly in the grains and oilseeds industries. Improved farmers’ incomes have boosted spending on agricultural equipment. On the downside, the unrest and looting in July were disruptive, but the cooperation amongst agricultural and logistics role-players ensured a continuous flow of agricultural exports. The primary agriculture sector could show positive growth in 2021, building from an excellent year of 13,4% year-on-year growth in 2020. Going into 2022, the early indicators about the agricultural growth prospects are positive.”

The full article is accessible by clicking here.

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Agile regulatory system key to South Africa’s agricultural productivity

Agile regulatory system key to South Africa’s agricultural productivity

Agricultural productivity growth – the increase in yield per unit (land/animal) – depends largely on technological innovation and the adoption of new seeds, new equipment, new genetics, as well as effective animal medicine.

Over the years South African farmers rapidly adopted new technology – either imported or developed from our own research and development processes at the Agricultural Research Council, universities and private sector. This has set South Africa’s agricultural sector, apart from much of the African countries in terms of output per hectare.

It is obvious that governments need to regulate any new inputs to ensure that humans, animals and the environment will not be harmed by the introduction of new chemicals, fertilizers or seeds. This regulatory process requires independent scientific assessments and evaluation of the trial data provided by the technology developers/innovators.

Some of these new inputs are often urgently needed to counter plant diseases or animal diseases that impact negatively and therefore the government processes must be agile, fast and rigorous to ensure the timely release of these new inputs to farmers and businesses.

The South African regulators and farmers have always been eager and flexible to adopt new technologies, including biological and mechanical innovations. This has helped the country to be nearly on par with the likes of Brazil in terms of crop yields per hectare. An example of this flexibility is South Africa’s openness to adopting genetically modified maize seeds widely in the 2001/02 season, which then contributed to the increase in yields.

The countries that did not follow this path experienced decline or subdued crop yields over the past couple of decades. For South Africa to remain competitive amongst the leading agricultural producers in the world in a range of crops, fruit and vegetables, role-players in the sector, especially regulators, should be more open to adopting and importing new technologies.

Unfortunately, this is not how things are progressing currently. Farmers, input manufacturers and organised agriculture has expressed their concern about the long delays in getting critical inputs approved by the office of the registrar of the Fertilizers, Farm Feeds, Seeds and Remedies Act 36 of 1947. There is an urgent need to overhaul and modernise that system and to deal with the large backlog of applications for new chemicals and new medicines.

For future gains and maintaining the country’s agricultural productivity, the same energy and dedication of the early 2000s to new technologies should be revitalised. Simultaneously, the regulators will have to apply the rigorous testing of the technologies before being adopted for commercial use in South Africa. With that said, if our peer agriculture countries such as South America, Canada, Australia and the United States have already adopted new agriculture technologies, then South Africa is inclined to take lessons from them and consider moving the same path to maintain our competitiveness. The slow adoption of agricultural technology is what, in part, has plunged numerous African countries into the low yielding agricultural sector and rural poverty.

South Africa has designated agriculture as one of the sectors that will drive economic recovery and rural economic activity for the coming years. This means the seed industry and various agrochemicals ideal for agricultural progress should be made available by the regulators to the farming community to attain this national goal. As such, the multiple streams of the Agriculture and Agro-processing Master Plan, which is the country’s plan based on a social compact to drive agricultural progress, should prioritise the inputs and take to heart various hindrances that agribusiness role-players and commodity associations highlight about the slowing trend of technology adoption in the country in the recent past.

In an environment of changing climate and erratic weather conditions, better or improved seeds and agrichemicals should be encouraged, while maintaining the regulators’ rigorous testing before adopting products for commercial use is vital. Disappointingly, the anecdotal evidence of the growing sentiment about the reluctance of the South African agricultural regulators to approve the release of new technologies presents large risks for the competitiveness of the agricultural sector in the coming years.

Admittedly, this is an economic view, and there are undoubtedly scientific considerations that are essential before countries make any notable calls for the adoption of technologies. Still, this is a matter that should be well discussed, and there should be close collaboration between agribusinesses, commodity organisations and government.

Ultimately, we should remember that our common interest is prosperous and inclusive South African agriculture and agribusiness sector. While differences in opinion might exist about various technologies and registration of new agrochemicals, such should be discussed with speed and ensure that in the process, maintaining and boosting South Africa’s agricultural productivity is an ultimate goal for all role-players involved.

This essay first appeared in The Herald, 24 November 2021

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Effective communication of the Agriculture and Agro-processing Master Plan key for implementation

Effective communication of the Agriculture and Agro-processing Master Plan key for implementation

Most of the national government’s agricultural policies and programmes depend on implementation by the provincial governments and municipalities for their success. The policies crafted in Pretoria have to find their way in various local agricultural strategies to materialize.

The same goes for organized agriculture structures such as the Agricultural Business Chamber of South Africa (Agbiz). The engagements about multiple issues that constrain agribusinesses can be discussed with government leadership in Pretoria. Still, the execution is typically dependent on the cooperation of the provincial government and various municipalities.

This doesn’t mean that the national government is not impactful, quite the opposite. It sets the tone and focus for policy and takes the lead in important programmes such as land reform and blended finance. But on most other policies, the details are often left to the provinces to execute. The levels of administrative efficiencies amongst the provinces are typically displayed through the implementation rate of various programmes.

The key to this process, aside from the technical competence of each provincial government or municipality, is communication. As the government pushes to complete its Agriculture and Agro-processing Master Plan (Master Plan) process by the end of the year and move towards implementation, it is important that the communication strategy becomes one of the priorities.

The implementation of the Master Plan will primarily depend on the collaboration of provincial governments, farmers and agribusinesses. This means all parties involved should have a shared understanding and buy-in of the Master Plan.

The private sector players have been represented in the drafting and consultation process over the past year, primarily interacting with the national government. The national government then has the responsibility to effectively communicate the Agriculture and Agro-processing Master Plan to all provincial governments. This helps in the near term and ensures that when the provincial government reviews their agriculture strategies, they align them with the Master Plan and allocate spending accordingly. This also means when the agribusinesses consult with the local government offices in various country regions, there could be a common understanding about the agriculture development focus of the country.

In communities with agriculture potential but limited or no organized agriculture, such as various regions (former homelands) of Eastern Cape (think of the Transkei region here in the province), Limpopo and KwaZulu-Natal, it is the government’s responsibility to communicate with the community leaders in such areas. The Master Plan is centred on a joint-venture approach to development. The communities are crucial to forming the shared vision and sense of responsibility in the implementation process.

In areas with organized agriculture groups, the provincial government should be encouraged to interact with various agribusinesses in their regions as they identify the potential projects of collaboration and areas of critical interventions to improve the ease of doing business. The government should lead this process, assisted by the national structures of various farmer groupings and Agbiz that I work for, and Agri SA and African Farmers’ Association of South Africa (AFASA), amongst others.

Such interactions would also help cover farmers and agribusinesses that are crucial in some towns, yet not members of established organized farmer and business groupings. All hands should be on deck during implementation. Roles and responsibilities should be communicated when agreed upon by the social partners. This requires effective communication from the government’s side.

Agriculture is a local government task. The challenges that various agribusinesses and farmers face, such as poor road maintenance, electricity supply, and water interruptions, are primarily critical local government competencies. These are also vital hindrances to investment and growth in the agriculture and agribusiness sector and are identified in the Master Plan.

As the technical work of the Master Plan draws to a close, the communication strategy should be drafted to nudge the provinces to budget along with the Master Plan objectives and interventions for their regions. The government should lead this communication effort, utilizing all possible cost-effective avenues, while organized agriculture and agribusiness also play a role through doing provincial visits.

Agbiz has already embarked on such a task through our recent visits to the Western and Eastern Cape and parts of Gauteng. We plan to proceed to other parts of Gauteng before year-end and other provinces next year. Our stakeholder engagement visits are not limited to the Master Plan but include a range of agriculture policy matters about the development and progress in our sector.

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Grim realities of South Africa’s agriculture infrastructure investment failures

Grim realities of South Africa’s agriculture infrastructure investment failures

Essay by Louw Pienaar and Wandile Sihlobo[1]

One would think every effort would be made in SA for fit-for-purpose, well planned and relatively low-cost agricultural infrastructure investments to be efficiently executed with speed, leading to the creation of thousands of jobs and a much-needed boost in economic activity.

But in the SA case, this is seldom the approach to development. We sit in endless rounds of meetings, forums and policy discussions where the need to expand irrigation agriculture to support export growth and jobs is mentioned, in line with the National Development Plan (NDP). Yet most such discussions do not lead to implementation.

This failure to implement policies and programmes is not due to a limit on the number of feasible options. We illustrate this with a case study of the Brandvlei dam project in the Western Cape, a prime example of how SA’s lack of implementation capacity is hampering progress to boost economic growth in rural areas.

The Brandvlei dam is located about 100km from Cape Town as you drive towards Worcester, and is the second-biggest dam in the Western Cape. At present about 26,000ha of fruit and wine grapes are irrigated from the dam, making it a critical resource for the entire district. The dam is unusual in that it is an off-channel dam — it is not built on a river but receives its water through divergence from two small rivers and a feeder canal.

However, the canal can only fill the Brandvlei dam to 73% of its maximum capacity. Whether the engineers built the dam wall too high or the wall of the inlet canal too low is immaterial. What matters is that by raising the canal walls by 30cm for 4km at a cost of about R20m, an additional 33-million cubic metres of water could be stored, leading to an additional 4,000ha of irrigated horticulture in the area.

Seems straightforward. Indeed, raising the wall of the inlet canal to Brandvlei Dam was included in the list of “strategic infrastructure projects: agri-logistics & rural infrastructure” in 2013. In 2015 the Western Cape agriculture department was mandated to take the lead in coordinating this project, which was quite a task given that the project required the cooperation of 17 different organs of state across the various spheres of government.

Yet, within a short time frame, there was widespread agreement on the importance of the project and a steering committee was established to drive its implementation. By 2017 all relevant actions had been completed, including the development of an agricultural sector development framework, a hydraulic and fluvial morphology study of the dam diversion, input from environmental affairs on whether an environmental impact assessment was needed for the proposed upgrades, a review of the water rights facilitation process, and a few others.

In the case of water rights, there was consensus that the additional water allocation would have a strong focus on black farmer development by locking in water rights for potential joint ventures with existing farmers. In short, there was a clear green light to go ahead with the project, and the committee spent countless days ensuring there were no practical impediments to the project given its clear benefits.

However, the committee was then informed there would be no funding from national infrastructure budgets, and it immediately started exploring options to fund the project outside the national fiscus. In the end, the Western Cape government decided to allocate funding from the provincial budget so that implementation and construction could be completed by March 2020.

Yet, at the time of writing there is still one outstanding step — approval by the national department of water & sanitation, which at the time of writing has still not been granted.

In short, there is a large opportunity and well-developed plan and process in place to make an infrastructure investment at a low cost that would have a large economic and socio-economic impact. It is estimated that the project will attract about R2bn-R3bn in on and off-farm investment and lead to more than 10,000 jobs being created.

As economists, we should be writing about how the additional hectares in the Breede Valley are contributing to a thriving rural economy, but instead, we are having to record how we have been struggling for four years to get a canal wall raised by a mere 30cm.

Farmers in the area should have been planting new orchards by now, but instead, they are worrying over how they will irrigate existing crops since the latest bout of load-shedding came at a time when farm electricity costs have already escalated by 16% this year. This is the reality on the ground in SA.

 This essay first appeared on Business Day, 15 November 2021

[1] Pienaar is a senior agricultural economist at the Bureau for Food & Agricultural Policy. Sihlobo chief economist of the Agricultural Business Chamber of SA.      

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Former homelands have been left behind to occupy the periphery of progress

Former homelands have been left behind to occupy the periphery of progress

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.

This reality hits you when you drive from the southern parts of KwaZulu-Natal to the northern parts of the former Transkei. The more established commercial farming parts in some regions of KwaZulu-Natal blossom with green pastures and bountiful crop farming. In contrast, the parts that fell under the homeland system are fallow even though they are sitting on arable land and a potential source of wealth.

The government’s interventions to prioritise agriculture in the past two decades have not led to meaningful improvement of the agricultural economy in the former homelands, more pointedly in the Eastern Cape’s Transkei region. Take the case of what was once a jewel of tea production in the Pondoland, the Magwa Tea. This is a shadow of its former self and is the only primary agricultural entity in the poor town of Lusikisiki. Magwa Tea has for years now been battling with poor management and plunder of resources. Stories of workers who go for months without receiving their wages are not uncommon, which shows the callousness of authorities.

Whenever I drive across Flagstaff, Lusikisiki, and Port Saint Johns I cannot escape the searing images of neglect of agriculture, which stand in stark contrast to Premier Oscar Mabuyane’s rhetoric, who often trumpets agriculture as the cornerstone of his provincial growth strategy. The reality tells a different story – that of neglect, lack of serious commitment to rural development, and failure to hold those who undermine his strategy to account.

The traditional leaders who wield significant influence in villages also bear significant responsibility for neglecting agriculture. For many of us who hail from these regions, promoting the province as the future agriculture economy of the country is a hard sell. Magwa Tea, for example, should have diversified from tea production towards high value and labour-intensive horticulture, acting as a hub for job creation and rural economic development. Breakthrough development in horticulture would put the province on the international map.

The province has a vehicle for rural and agricultural development in the Eastern Cape Rural Development Agency. Still, this entity operates in isolation when it can do more if it works with agribusinesses with a track record in managing agricultural production.

The Eastern Cape can draw lessons from provinces such as the Western Cape, Mpumalanga, and Limpopo, thriving commercial agriculture and supporting institutions. The production activities in these areas have buoyed growth in South Africa’s agriculture and sustained local economies.

There is growing evidence that the Eastern Cape’s farmer support programme is inefficient. A critical study was published in the Agrekon, an academic journal, in 2019 by the University of Fort Hare’s agricultural economist, professor Michael Aliber, argued that the Eastern Cape’s government “is stuck in a vicious cycle whereby it seeks to placate expectant small-scale farmers with material support, which it can most effectively do via problematic group projects; although generally ineffective, the practice has the effect of maintaining widespread demand for such support, even to the point that small-scale farmers form group projects for the sole purpose of attracting it.”

Simply put, the support programme, while inefficient, also encouraged dependency. Aliber further argued in the same paper that supporting individual farmers with rather soft loans would be more effective.

The government needs to focus its attention on supporting the new crop of commercial black farmers, which would be anchors of agricultural development in the former Transkei. Government support measures must be better coordinated and focused on supporting individual commercial farmers rather than spreading thin resources on numerous subsistence farmers that lack scale.

The “better few, but better” approach should be a mantra in supporting farming businesses in the Eastern Cape, and this is the only way the country will have a class of thriving black commercial farmers with a higher multiplier effect for the development of related sectors in storage, processing, and retail.

This essay was written for Business Day and appeared on 02 November 2021

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South Africa’s position in the global food security ladder

South Africa’s position in the global food security ladder

The Economist recently released its Corteva-sponsored Global Food Security Index results for 2021. South Africa is now ranked 70th out of 113 countries, slipping from position 69 in 2020 and 44 in 2019. At face value, this decline is quite concerning. However, when one looks at the Index scoring’s technical position, it becomes clear that South Africa is not doing as badly as the “headline” ranking suggests.

Closer inspection reveals that South Africa’s scoring had a one-point year-on-year (y/y) drop in 2020, and thereafter it has remained unchanged. The score came in at 57,8 in 2021, which is the same level as 2020, but down by 1,4 points from 2019. Nonetheless, other countries have improved notably since 2019 as South Africa stagnated, resulting in the relative deterioration in South Africa’s ranking to 70.

The Global Food Security Index comprises four subindices, namely; (1) food affordability, (2) food availability, (3) food quality and safety, and (4) natural resources and resilience. The affordability and availability have a higher weighting of a combined two-thirds. The affordability subindex includes a change in average food costs and the proportion of a population in poverty. Meanwhile, the availability subindex includes the sufficiency of supply, agricultural infrastructure, and political and social barriers to food.

In 2021, South Africa experienced a mild deterioration in the food affordability and availability subindices by 0,7 and 0,1 points, respectively. Meanwhile, the rest of the other subindices improved marginally.

In the case of affordability, the major challenge was an overall increase in food prices. This is not far off from what even local researchers have observed in various surveys. For example, the fifth wave of the National Income Dynamics Study – Coronavirus Rapid Mobile Survey highlighted that some households had run out of money to buy food since the pandemic started, thus observing a rise in food insecurity.

Moreover, South Africa’s overall food price inflation has been elevated this year, averaging 6,5% y/y in the first eight months of 2021, from 4,8% in 2020. But it is worth emphasizing that this challenge speaks to the rising cost of food in an environment where more people are out of work due to the COVID-19 pandemic.

Importantly, the rise in food prices is a global phenomenon and not unique to South Africa. The dryness in South America, which negatively affected the crops in the 2020/21 production season, combined with growing demand for oilseeds and grains in China, and higher shipping costs, are some of the factors that have underpinned global food price inflation This, in turn, supported prices in South Africa.

In terms of availability, I find the deterioration of this subindex inconsistent with the reality in South Africa. The 2020/21 production season was the second largest in history in terms of grains and oilseeds. In horticulture, the citrus industry had a record harvest, while other fruits and vegetables experienced a general improvement in output. In such an environment of abundant output, one wouldn’t expect a decline in the “availability” subindex. There is also no major change in agricultural infrastructure, and political and social barriers to food over the past nine months compared to 2020. The only notable glitch in supply chains was during the KwaZulu-Natal and Gauteng unrest and even then, it was short-lived.

A major issue to keep in mind when observing global agricultural indices such as Global Food Security Index, is that subjectivity can never be fully eliminated from the authors’ judgment, resource constraints can hinder objective data collection on the ground in each country, and they sometimes rely on blueprint models that might not be site specific. Sources of bias can stem from the data’s inconsistency in quality, frequency and reliability across all countries. The weightings and rankings are also tricky because they have to be tailored to suit different socio-economic contexts.

Overall, the key message is that South Africa will need to continue to improve agricultural efficiency, which will contribute to job creation and ultimately improve food security.

This essay first appeared on Business Day, 19 October 2021

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