South Africa agriculture jobs up in Q4, 2019

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

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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What’s needed for South Africa’s agriculture to boost jobs?

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.

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Blueberries and Jobs in South Africa

Blueberries and Jobs in South Africa

I’ve previously presented the case for agriculture as one of the sectors that could boost rural economic growth and employment in South Africa. The sub-sector that has attracted attention in the recent past is horticulture because it is labour intensive. Within the horticultural subsector, the market dynamics of citrus, table grapes, wine grapes, stone fruit and nuts, amongst others, are well documented.

The rarely discussed, yet exciting fruit is blueberry. The dearth of information about this fruit is understandable because the blueberry industry is still at its budding stage in South Africa. The area planted to blueberry in 2017/18 is estimated at only 1 600 hectares. But this has grown tremendously over the past few years, as shown in Figure 1 below.

Figure 1: South Africa’s Area Planted to Blueberry

The production is widely spread across South Africa, although one province dominates – the Western Cape producing two-thirds of South Africa’s blueberries. Trailing the Western Cape is Limpopo, accounting for 15% of production, then North West (10%), Gauteng (8%), Eastern Cape (4%), Free State (2%) and Mpumalanga (1%). This is according to data from the U.S. Department of Agriculture (USDA).

The enormous increase in production that is illustrated in figure 1 is export-driven. South Africa exports roughly 70% of its blueberries, according to data from the Western Cape Department of Agriculture. The European Union accounts for roughly 90% of South Africa’s blueberry exports, the rest is spread across the African continent, Asa and the Middle-East.

Okay, why do I say blueberry is an exciting fruit?

Aside from being nutritious and tasty, blueberries are labour-intensive, which is precisely what is needed in South Africa. A recent paper by the Western Cape Department of Agriculture’s agricultural economists, Louw Pienaar, Mzwanele Lingani and Philip Swart shows that each hectare of blueberries planted results in the direct employment of 2.64 fulltime equivalent workers, on average. This is the highest employment intensity amongst the major fruits grown in South Africa, and it far outpaces grapefruit, flowers, apples and pears, to no name a few.

In terms of economic fortunes, Pienaar, Lingani and Swart estimate that South Africa’s blueberry industry has significantly outperformed other fruit industries by growing its gross value of production from an estimated value of R15.8 million in 2008 to R1.25 billion in 2018.

So, when we think of agricultural sub-sectors that can boost rural economic fortunes and job creation, let’s not only focus on well-established industries, but also explore the small, yet promising industries such as blueberries.

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