SA’s agric sector a saving grace during the pandemic

22 Oct, 2021 - 00:10 0 Views
SA’s agric sector a saving  grace during the pandemic

eBusiness Weekly

Wandile Sihlobo

The agricultural sector’s gross value-added expanded by 13,4 percent year-on-year in 2020, supported by increased production across all major sub-sectors — livestock, field crops and horticulture.

I believe SA’s agricultural sector will grow by over 6 percent this year and will likely slow to a long-term average of about 3 percent in 2022. The continuous favourable weather conditions, strong export activity, and relatively higher commodity prices will remain critical catalysts for growth in this sector in the near term.

While there remains uncertainty about the commodity price trajectory, the expected La Niña and associated dryness it typically brings to South America could prove to be a significant global price supporting factor and, in turn, boost SA’s agricultural commodities market.

In the case of trade, SA has experienced numerous challenges at the ports through delays, theft of Transnet infrastructure, cyber-attacks, and general inefficiency, which calls for a need to improve and modernise SA’s shipping ports. Still, agricultural exports have held on positively for the first half of this year.

I suspect that the full-year exports will surpass the 2020 levels of $10,2 billion, the second highest on record. In the first half of 2021, the country’s agricultural exports amounted to US$6,1 billion, which is a 30 percent year-on-year increase. Compared with last year, the growth is partly because of base effects, as the first half of 2020 was heavily affected by the Covid-19 related disruptions to global supply chains.

Still, the growth reflects rising export performance for various products. The vibrancy could be seen across the major subsectors of the SA agricultural economy — field crops, animal production, and horticulture. As such, I am confident that employment in primary agriculture could also remain elevated around the average long term of 852 000 people. Already, in the second quarter of this year, direct agricultural jobs recovered from the slump of the first quarter by 9 percent quarter on quarter and 8 percent year-on-year to 862 000.

Long term growth prospects and policy dynamics

While these near-term growth prospects support the sector, unlocking the full growth potential over the long run will require policy interventions within agriculture and crosscutting government departments. This area has remained a challenge for SA for a while because of the poor implementation of government policies and programmes.

As far back as in 2012, the government published its National Development Plan (NDP), which promised prospects of accelerated growth and job creation at the sector’s primary and value chain level. But as with some policies before it, SA never fully implemented the ideas of Chapter Six of the NDP.

The prerequisites for unlocking growth in the sector included a need for investment and expansion of irrigation infrastructure across the country. 

If done properly, it would have unlocked about 500 000 hectares for the horticulture sector — a labour-intensive sub-sector.

In addition, the government had plans to convert some underutilised 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 could mobilise funding opportunities. Also, it was going to support the commercialisation of new farmers instead of locking them into small farming enterprises.

Unfortunately, none of these plans were implemented fully. The expansion that we have observed in agriculture since 2013 has been led by private sector firms rather than the government. As a result, the discussion about the low levels of transformation in SA’s agriculture continues to linger.

The National Agricultural Marketing Council estimates that black farmers in SA still constitute less than 10 percent of the commercial production. To address the low transformation challenge and potentially slower growth in agriculture in the coming years, the government has revived the high-level views of Chapter Six through its Agriculture and Agroprocessing Master Plan.

The plan involves social compacting between business, labour, and government, among other stakeholders. Its major contribution is that it has managed to map commodity corridors through which expansion could take off and clearly outline the types of investment and infrastructure needs in each area. Still, this will need a full buy-in of all agricultural role players.

Areas that need attention

The two major areas that need increased attention are messaging and participation of the provincial and local governments and the financing instruments beyond the blended finance model that the government has launched in its first leg.

On the first point, some of the most critical implementation for the agricultural sector happens at local government level, even if the policies are crafted nationally. Therefore, the national government should ensure that the provinces’ agricultural strategies are aligned with the overall national policy approach of the master plan. This will need proactive communication and engagement from the national government. The blended finance instrument is a welcome development but will not be sufficient to fund the new-entrant farmers and initiatives entailed in the master plan. Social partners should work on the financial strategy to implement the plan, and the government will have to be proactive in this regard.

The first step from the government side would be through ensuring that all provincial spending is aligned with this new plan for agricultural development. —

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