This is how South Africa could unlock its agricultural growth potential

I think South Africa’s agricultural sector will grow by over 6% this year after already strong 13.4% year-on-year growth in 2020. Nonetheless, this expansion will likely slow down to a long-term average of around 3%. in 2022. Favorable weather conditions, strong export activity and relatively higher commodity prices will remain key catalysts for the growth of this sector in the near term.

Although uncertainties remain about the trajectory of commodity prices, the expected Niña and the associated drought it typically brings about in South America could prove to be an important factor in supporting world prices and, in turn. , stimulate the South African market for agricultural commodities.

In the case of trade, South Africa has experienced many difficulties in ports due to delays, theft of Transnet infrastructure, cyber attacks and general inefficiency, making it necessary to improve and modernize ports.

Nevertheless, agricultural exports held up positively in the first half of this year. I suspect full-year exports will exceed 2020 levels by $ 10.2 billion. In the first half of 2021, South Africa’s agricultural exports amounted to $ 6.1 billion, a 30% year-on-year increase. Compared to last year, the growth is partly due to base effects; the first half of 2020 was strongly affected by the disruptions linked to Covid-19 in global supply chains. Nevertheless, the growth reflects the increase in export performance for various products.

The dynamism was visible in the main sub-sectors of the agricultural economy – field crops, animal production and horticulture. As such, I am convinced that employment in the primary agriculture sector could also remain high in the long term average of 852,000 people. Already in the second quarter of this year, direct farm jobs have recovered from the first quarter’s drop of 9% qoq and 8% yoy to 862,000.

While these short-term growth prospects support the sector, unlocking the full potential for long-term growth will require policy interventions in agriculture and cross-cutting government departments. This area remained a challenge for South Africa for some time due to poor implementation of government policies and programs.

In 2012, the government published its National Development Plan, which promised prospects for accelerated growth and job creation in the primary sector and the value chain. But, as with some policies before it, South Africa never fully implemented the ideas of Chapter Six of the National Development Plan. The prerequisites for unlocking growth in the sector included a need for investment and expansion of irrigation infrastructure. If done correctly, it would have freed about 500,000 hectares for the horticultural sector, a labor-intensive sub-sector.

In addition, the government had to convert some underutilized land in communal areas and land reform projects into commercial production. This intervention would have involved a transfer of land rights to beneficiaries so that they can mobilize funding opportunities. In addition, the government had to support the marketing of new farmers instead of locking them into small farm businesses. Unfortunately, none of these suggestions have been fully implemented.

The expansion we have seen in agriculture since 2012 has been led by private sector companies rather than the government. As a result, the discussion of low levels of processing in agriculture continues to linger. The National Agricultural Marketing Council estimates that black farmers still account for less than 10% of commercial production.

To cope with the weak transformation and potentially slower growth of agriculture in the coming years, the government has revived the high-level views of Chapter Six of the National Development Plan through its Master Plan for Agriculture. and agro-industry. The plan involves social compaction between business, workers, and government, among other stakeholders. Its main contribution is that it has succeeded in mapping the commodity corridors through which expansion could take off and clearly describes the type of investment and infrastructure needs in each area. However, this will require full buy-in from all agricultural stakeholders.

The two main areas that I believe require increased attention are (1) provincial and local government messaging and involvement, and (2) funding instruments beyond the blended funding model that the government launched in its first step.

On the first point, some of the most critical implementations for the agricultural sector occur at the local government level, even though policies are developed at the national level. Therefore, the government should ensure that the agricultural strategies of the provinces are aligned with the overall national policy approach of the master plan. This will require proactive communication and discussions on the part of the national government.

Second, the blended finance instrument is a welcome development but will not be sufficient to finance new farmers and the initiatives foreseen in the master plan. The social partners should work on the financial strategy to implement the plan, and the government should be proactive in this regard.

The first step on the government side would be to ensure that all provincial spending is aligned with this new agricultural development plan. The provinces should not continue with their old spending habits on various projects, but rather align with this new national vision. This is a discussion that could be facilitated within government, so that the appropriate policies and procedures are followed.

Another essential point that the government will have to reassess is its land reform policy. The development and expansion foreseen in the master plan requires private investment in the new land and partnerships. Such interventions are likely to continue to be a challenge in the absence of clarity on land reform policies. Although already advanced in the National Assembly, the debate on expropriation without compensation will not serve the sector and the economy well.

In principle, the focus should be on securing property rights, releasing land already on the government’s books to carefully identified beneficiaries and pursuing various instruments to accelerate land reform. Some were highlighted in the report of the President’s Advisory Group on Land Reform and Agriculture.

In sum, the outlook for the growth of South Africa’s agricultural economy is positive in the short term. Nonetheless, long-term growth prospects depend on the pace and commitment to implement reforms such as the Master Plan for Agriculture and Agribusiness, as well as various land reform suggestions in the report of the President’s Advisory Group, among others. Agricultural finance is another important area that requires the attention of all social partners.

About Natalee Broderick

Natalee Broderick

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