Business Blockbuster - Helpng business to be more visible on Google

Daily Bulletin

South Africa's struggling agricultural sector: what went wrong 20 years ago

  • Written by: The Conversation
imageA South African farmer from Piketberg 100km outside Cape Town inspects the dry soil in his field of sewn wheat. It is cheaper to import the crop than to grow it commercially.Epa/Nic Bothma

South Africa’s decision to play by the global rules of free trade post 1994 put the country’s agricultural sector in a difficult position.

While it was expected to compete against the best in the world, the support that could have helped it was taken away. At the same time, the countries it was competing against were very supportive of the sector - some times as much as three times more. This meant that new black farmers missed out on the opportunity to catch up with farmers who had been supported previously.

Beyond that, there was the problem of land reform which needed to be addressed without putting the spirit of reconciliation as well as productivity at risk.

South Africa has limited agricultural potential and produces at relatively high cost to attain the same unit of output as most countries in the world. It is classified as a semi-arid area, meaning its rainfall is low and erratic. The country has an average annual rainfall of less than 500 mm compared with the global average of 860 mm.

Only 12% of its 1.2 million square kilometres is suitable for agricultural use.

Political imperatives

Although the agricultural sector had to provide food, the new democratic government also needed it to address political challenges related to rural development, social and political issues. The focus at the time was on transforming the sector to achieve these political goals rather than to prepare for global competition.

Looking at land ownership, this is understandable. More than 80% of agricultural land was owned by white commercial farmers, yet the white population made up about 13% of the country. Addressing the unequal and racially skewed land distribution would also contribute to overcoming the socioeconomic challenges the country faced. These included unemployment, income inequality, food insecurity, poverty and malnutrition.

Possibly the biggest of them all is unemployment, which has remained at more than 20% in this 20-year period. The majority of the unemployed are unskilled or have low skills and are affected by low and poor levels of education. The agriculture and mining sectors absorb the majority.

Employment in the sector has declined substantially over time. In the 1970s agriculture used to employ over 2 million people on farms alone, or about a quarter of the employed. By 2014, fewer than 700,000 were employed on farms, less than 5% of the employed.

Tracing the problem

Within a year of the democratic government coming into power it had to accede to the World Trade Organisation (WTO). This meant that South Africa entered into an agreement that exposed its economy to global competition and had to play by global rules, both at home and internationally.

Other agreements were signed with the European Union (EU) and southern African countries. Some are still being negotiated.

The direction taken by the new government was contrary to the stance adopted by the apartheid government which protected and supported white South African businesses. The agricultural sector was a beneficiary through various forms of support. This included direct subsidies or through institutions such as commodity boards. The boards were responsible for regulating and supporting commodities through price setting, inputs, throughput and final products.

But the support was a burden to the national fiscus. To reduce costs the new government got rid of the boards. The government would not have managed to finance 60 000 white commercial farmers only, while there were an estimated 3 million smallholder farmers who have not received support from the pre-democratic government. To balance the scales, it was more convenient to remove most of the support than to expand it.

imageBlack farmers like Koos Mthimkhulu have not received sufficient supportReuters/Siphiwe Sibeko

The consequences

Two decisions - accession to the WTO and deregulation - put the sector in a very difficult position. In terms of job creation the sector has performed poorly. In addition, its contribution to GDP has shrunk to less than 3% of GDP from 4.6% in 1994.

Land redistribution has also not succeeded. Only 7.5% of he land targeted for black people has been transferred.

The problem with this failure is that it has led to radical proposals that could lead to outcomes similar to those experienced in Zimbabwe.

There has also been very declining government contribution to research & development and an intensive extension service. The R&D gap has been partly filled by the private sector.

While international market access has improved and there is evidence of global competitiveness, domestic competition has become much tougher. Examples of this include the influx of poultry products, frozen potato chips and increasing wheat imports.

Hectares planted for wheat are now one third of what they were in the late 1980s. This is because it is cheaper to import wheat than to grow it. The same is true of cotton. In the early 1990s, more than 100 000 ha used to be planted for cotton. Now only one tenth of that is planted because cheaper products can be imported.

Some positive outcomes

Despite the limited agricultural potential and resource scarcity, South Africa has managed to make substantial improvements in many areas. It remains one of the main exporters of agricultural products to the most lucrative markets in the developed world. It exports citrus, wool, avocados and nuts to the US and horticultural products, wine and tea to the EU.

South Africa has also found new markets. Its biggest trading partners are now in Africa, overtaking the EU which used to dominate most facets of trade.

There has also been more diversification in terms of products such as soybeans. These are in high demand globally and investment is increasing to support production. Production has been increased with the use of fewer hectares due to technology adoption and the planting of genetically modified organisms.

Government played an instrumental role by opening up markets, creating the environment and adjusting policies to allow the private sector to take advantage of opportunities. It also opened up market access beyond what was required by the WTO.

Policy concerns

Some of the contributors to the sector’s poor performance have been policy implementation and the panic these have caused among farmers. Land reform is one policy area that will need to be designed and implemented better.

There are other government programmes which were pursued with the aim of transforming the sector, but the implementation, evaluation and monitoring have been very poor. Support of smallholders and black farmers was inadequate and was without mentorship.

Technology transfer/adoption and extension services were either poor or non-existent in many areas. And some national policies are not helpful to farmers to compete in global terms because the custodians are separate government departments. Even if these issues were addressed, South Africa will remain a high-cost producer which presents its own set of challenges.

Mmatlou Kalaba receives funding from National Research Foundation (NRF).

Authors: The Conversation

Read more http://theconversation.com/south-africas-struggling-agricultural-sector-what-went-wrong-20-years-ago-45171

Business News

The Growing Demand for Durable Plastic Packaging Supplies Across Australia

Why Do Australian Businesses Need Reliable Plastic Packaging Supplies? Businesses need packaging that can withstand everyday handling, storage, and distribution without creating avoidable delays. Pla...

Daily Bulletin - avatar Daily Bulletin

Office Cleaning Melbourne: Choosing the Right Scope for Your Office

A well-planned office cleaning Melbourne arrangement starts with a clear understanding of the premises and the people who use it. An office may include private work areas, shared desks, reception, mee...

Daily Bulletin - avatar Daily Bulletin

How Businesses Can Prepare for Unexpected Power Outages

Power failures can occur quickly. The supply may be interrupted by bad weather, issues with the electricity network, damaged equipment or local construction work. This can be just a hassle for a fam...

Daily Bulletin - avatar Daily Bulletin

How Chatswood Tutoring Can Fit Into a Student’s Weekly Routine

Create a Predictable Weekly Structure A consistent weekly routine can make study easier to manage when students are balancing several subjects. Chatswood tutoring can provide a fixed learning point a...

Daily Bulletin - avatar Daily Bulletin

The Rise of Digital Marketplaces in the Australian Trade Sector

For decades, the Australian trade and construction sector operated almost entirely on word-of-mouth recommendations and local community networks. Small business owners typically relied on local newspa...

Daily Bulletin - avatar Daily Bulletin

How Immigration Lawyers Can Help

Introduction Visa decisions can shape employment, family life, study plans, travel, and future residence. A small omission can lead to delay, added expense, or refusal. Immigration lawyers assess l...

Daily Bulletin - avatar Daily Bulletin

How Industrial Drying Equipment Supports Efficient Processing

Many industrial processes require moisture to be removed from compressed air, products or process materials before they move to the next stage. Excess moisture can affect equipment performance, produc...

Daily Bulletin - avatar Daily Bulletin

Practical Ways a Whiteboard Can Improve Workplace Communication

Effective communication helps teams stay organised, share ideas and keep track of important information. While digital tools are now common in many workplaces, a whiteboard continues to provide a simp...

Daily Bulletin - avatar Daily Bulletin

Designing Eco-Friendly Custom Water Bottles for Your Next Event

The Evolution of Sustainable Event Merchandise Event planning has undergone a massive transformation over the last decade. Gone are the days when organizers could hand out cheap, single use plastic...

Daily Bulletin - avatar Daily Bulletin

The Daily Magazine

Cybersecurity Services and Solutions for Complete Digital Protection

Businesses leverage Cybersecurity solutions for protection against digital threats of the modern era...

What Australian Entrepreneurs Should Know About Streamlining Their Financial Processes

Running a small business in Australia demands much more than just delivering a great product or serv...

Supporting Joint Health in Young and Growing Horses

Anyone who has raised a foal through to a rising three-year-old knows how deceptively fast the gro...

Why Is My Switchboard Buzzing? What a Humming Breaker Is Telling You

Most people never hear their switchboard. It sits quietly in a cupboard, a hallway or a meter box ou...

Solar Panels Geelong: Key Factors to Consider Before Installation

Solar power can help households and businesses generate electricity on site, but the value of a syst...

How Rats and Mice Get Into Homes Through Gaps Most People Miss

Rats and mice do not need an open door to get inside a home. They can squeeze through small openings...

Why a Safety Certified I/O Module Matters in Machine Design

Understanding Safety-Related I/O A safety certified I/O module is designed for use within an arch...

How to Compare Ceiling Fans online before Buying

Comparing ceiling fans online before making a purchase helps you understand how each model will su...

How Does a Portable Power Station for Carvan Adventures Support Smarter Camping?

Why Does Off-Grid Camping Need a Reliable Portable Power Station for Carvan Travel?  People often...