The local agricultural sector has the potential to be among the sectors that will drive economic growth and job creation in the post-COVID-19 recovery phrase. The path to realising this growth does not need new policies. The South African government should rather recast its vision of agricultural development using Chapter Six of the National Development Plan (NDP) as the point of departure.
The NDP proposes a three-tier approach for agriculture and agroprocessing to reach its fullest potential of creating one million jobs by 2030, namely:
- The development of under-utilised land, especially in former homeland areas and underperforming land reform farms (approximately 400 000 jobs).
- The expansion of export-led high growth areas (approximately 250 000 jobs).
- Investment in agroprocessing with integrated up- and downstream linkages (approximately 350 000 jobs).
What will need to be done differently after the pandemic is the realisation that the broad vision should be followed up with detailed operational plans to guide officials and various stakeholders at the local level.
Master Plan for the agricultural sector
The Department of Agriculture, Land Reform and Rural Development is currently drafting the sector Master Plan, with input from private sector players. Such a plan should prioritise high-value job-creating subsectors; it should not only focus on areas where the agricultural sector is well established at the commercial level, but also on new areas that have untapped potential.
Such areas involve the former homeland regions of South Africa, government land and underperforming land reform farms. The Master Plan should map these areas, along with potential agricultural activities that could be promoted. Another crucial step will be to understand why agricultural development has lagged over the past two decades in such regions, while in the commercial agriculture areas the output has more than doubled since 1994.
There are several reasons that explain this disparity in fortunes, the major ones being lower levels of investment in agriculture and lack of infrastructure. In terms of investment, poor land governance, both in the former homelands and some underutilised land reform farms, have been the key impediments, while the lack of infrastructure has been compounded by poor service delivery in various local municipalities, especially in former homeland towns.
Given these structural challenges, the Master Plan will have to lucidly articulate ways and means to increase investment, as well as improve or capacitate local governance. In the case of investment, agriculture is a long-term economic activity with relatively modest returns. Given this reality, the South African government will have to clarify its long-term view on land reform policy, not only for areas that are already farming commercially, but also for the former homelands, where investment and commercial agriculture is set to make the biggest impact.
Public and private partnerships
A renewed drive for the prioritisation of joint venture models between the private sector and the government is now critical in bringing about development. The private sector will not only bring ‘know-how’, but also capital investment. South Africa already has examples of such programmes from which to build on. These include, among others, the Sernick Group in the beef sector in the Free State, and the Humansdorp Co-op, which focuses on field crops and horticulture, in the Eastern Cape. Both companies have partnered with government and communities for the development of black farming businesses.
The Master Plan should reflect on such examples of successful programmes and further innovate and develop institutions that effectively drive and sustain development. Moreover, the post-COVID-19 agricultural development plan should encompass the agroprocessing side, as it will add to job creation and development in rural towns.
On this particular point, private sector investment should also be encouraged. Therefore, the Master Plan should reflect on strategic incentives for firms to expand agroprocessing in towns which may not be predominantly agricultural. This could be in the form of tax incentives for various agricultural hubs, which will be determined by the type of agricultural activity.
In areas where weather conditions permit, the government should encourage the expansion of horticulture production as this subsector has higher labour absorption multipliers than other subsectors of agriculture, as well as a higher value.
Levels of policy implementation
These ideas aren’t new. There is no need to reinvent the wheel. Instead, the focus should be on understanding why policy implementation over the past two decades has been so low. Addressing the stumbling blocks to development (i.e. investment and infrastructure) and focusing on effective implementation are the key ingredients of a successful post-COVID-19 agricultural sector.
While the private sector’s role might have been less pronounced in the past, the tight fiscal position that the South African government is currently in demands a need for external funding to drive development in agriculture. This means agricultural development after COVID-19 will require deeper and greater participation of the private sector. However, effective private sector participation demands greater levels of policy certainty, especially regarding land reform, from government. Government will have to take an investment friendly approach, which is anchored in development. – Wandile Sihlobo, Agbiz
Wandile Sihlobo, chief economist at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agricultural markets for the major commodities.
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