Wandile Sihlobo, Agbiz

Policymakers have been forced to think creatively to address South Africa’s sluggish economic growth and high unemployment rates. In the search for solutions, agriculture has featured prominently as a sector with potential to create employment in the rural areas. This assumes that there is room for potential expansion in areas planted to the horticulture and field crop subsectors, which currently employ two thirds of the primary agriculture labour force of 842 000, according to data from Statistics South Africa.

According to a 2015 study by the McKinsey Global Institute, the focus areas for potential expansion are KwaZulu-Natal, the Eastern Cape and Limpopo, with roughly 1.6 million to 1.8 million hectares of underutilised land between them. Soil preparation, irrigation scheme expansion and land governance would be prerequisites for development in these areas. These provinces also have the highest levels of unemployment and a concerted effort to unlock regional growth and create employment would have positive welfare effects.

However, there is a troubling trend that could well hinder the potential expansion of agriculture in KwaZulu-Natal, Eastern Cape and Limpopo. During December 2018 and January 2019, we decided to tour across rural areas of the Eastern Cape and KwaZulu-Natal after noticing an expansion in human settlements in some regions. Although general trends suggest an increase in urbanisation, anecdotally, there seems to be a growing expansion in settlements in the former homelands, to the degree that agricultural land is increasingly used for residential purposes. We are raising this issue as a caution to policymakers not to think of agricultural expansion as an isolated matter, and to consider protecting agricultural land by zoning it at a municipal level.

Expansion in rural settlements indicates that the status of some of the land deemed underutilised, and therefore available for agriculture, in the 2015 McKinsey Global Institute study, may have changed. Aside from the protection of agricultural land, South Africa needs to improve its data collection on land use in rural areas, as this will assist in policymaking and planning.

Although we view the growing demand for land from non-agricultural sectors as a key threat to agricultural expansion, the sector still holds potential for labour-absorbing growth in rural areas. All agricultural subsectors are important from a perspective of food security, but potential investment in the sector should largely be in labour-intensive agriculture in the near term, if we are to respond to the challenge of unemployment. In this aspect, horticulture remains a sector with a key role to play. It is also worth noting that there is a growing demand for horticultural products in the global market, underpinned by changing consumer perceptions to healthy diets. This presents an opportunity for South Africa to partially address the twin challenges of unemployment and weak economic growth. –Wandile Sihlobo

Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his weekly update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.

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