It is scorching hot outside and the air conditioners on the eighth floor of the OR Tambo building is running at full blast, almost drowning out the voice of the speaker addressing the audience – at 07:30 it is already 28°C outside, with an expected maximum of 40oC for the afternoon. While looking out of the window and thinking about how desperately we need rain, the speaker is talking about the national stance of the agricultural sector in South Africa.
I am part of the Free State Provincial Research Advisory Committee’s (PRAC) round table discussion organised by the Department of Economic, Small Business Development, Tourism and Environmental Affairs (DESTEA). The theme for the day is Strengthen Research Partnership for Inclusive Economic Growth: Accelerating Growth in Agriculture.
The round table discussion was initiated in response to the contraction of the agricultural GDP in the first two quarters of 2018, with plans now having to be made to accelerate growth in this sector. The chairperson for the day mentions in his opening comments that the agricultural sector has been performing dismally for a number of years, and that he does not have high hopes for a possible revival in the sector. Is it still worthwhile to invest in research in a sector so badly affected by the volatility in South Africa?
I am listening to the words in utter disgrace, silently wondering how this situation can be dealt with. For me, the most remarkable thing is the fact that the primary agricultural sector is being made out as a struggling sector for which there is no hope, and that it is a sector contributing very little to the economy of the country.
Yet at the same time the debate for land expropriation without compensation is ongoing. So, if you put one and one together, it basically means that the government wants to give land – a hopeless dream with basically no chance of success – to people who think the land they receive will make them rich. The sums do not add up.
What is more concerning is the fact that the provincial government of the Free State, according to the chairperson of the meeting, believes there is no hope for the primary agricultural sector and that the need for investment in this sector is debateable. This is an aspect we must investigate and a perception we need to reverse.
Current stance of agriculture
Figure 1 provides the percentage change in the annual GDP for agriculture at constant prices (2010=100). The cyclical nature of the industry is clearly visible in the graph, but it does not necessarily mean that the industry is underperforming.
The average annual change for agriculture over the full period was 2%, which compares fairly well to the total of primary industries at 3%, secondary industries at 2,6%, and the total economy at 2,9%. While these figures do not consider the size of agriculture’s contribution to total GDP, it does indicate an overall positive performance from the industry on its own. However, the problem is that the bigger picture (time range) is often ignored and the appalling performance of one or two years is used to measure the performance of the industry.
A very good example of this is the fact that agriculture was marked as ‘hopeless’ at the end of 2018, after the negative GDP performance in the first two quarters of 2018 – the extremely good performance of the sector, which had an average quarter-on-quarter growth of 35,8% during 2017, was all but forgotten.
Fingers are also frequently pointed to certain provinces, with remarks that this or that province is contributing very little to the GDP in terms of agriculture commonplace. Figure 2 provides the contribution of the different provinces to the country’s agricultural, forestry and fisheries GDP, and it is clear that there is essentially little difference between them.
As seen in Figure 2, it is only the Western Cape and Kwazulu-Natal that contributes markedly more than the rest. It should be remembered though that their figures include larger fisheries and forestry sectors, as well as some high-value crops, compared to the other provinces.
However, the fact that primary agriculture has its fair share of challenges is undeniable. In fact, there are many. For any producer, it is a difficult task to perform under such adverse conditions as those found in South Africa. If the performance of the sector is considered, taking into account the variability of the climate and markets, among other factors, producers are doing a really good job.
If we talk about reviving primary agriculture, we must focus on the challenges experienced by the producers to lighten their load.
The needs of primary agriculture
Although different producers have different needs that should be addressed, it should be attempted to determine what assistance will be beneficial to the entire sector. I believe one of the most important aspects currently needed is clear policies.
The lack of clear policies only creates additional uncertainty in the sector and is a hindrance to sectoral investment. Without knowing where the land expropriation without compensation issue is heading, and the associated possible changes to the Constitution, producers and investors are not keen to invest in the sector as it is currently an unsafe investment, without a guarantee of ownership.
The agricultural sector needs clear policies to guide it. These policies should be acceptable to local and foreign investors, consistent with one another, as well as feasible.
The second area that needs attention is increased assistance from the government for small-scale and commercial farmers. There are commercial farmers in the country who are on their knees, unable to produce much needed food, as their financial position prevents them from obtaining production loans.
The government must consider a zero effective interest rate for any producer who cannot make his/her farm profitable again after the occurrence of a devastating natural disaster (drought, fire, etc.). In addition, the government should reconsider the state of the national animal health status and come up with a proper and workable plan to regain our meat export status.
Another situation that is slowly progressing towards crisis level is the inability of farmers to obtain multi-peril crop insurance, without which they cannot get production loans. South Africa needs a government assisted crop insurance scheme for all producers, especially since the number of small-scale farmers are increasing.
Food for thought
None of the solutions mentioned will be possible without proper research to analyse the costs and benefits of the different schemes, as well as to come up with clear, implementable plans to follow them. It seems as if a sizeable portion of the country’s funds are currently poured into different small initiatives, with no communication between these initiatives. Maybe it is time to fine-tune our planning and to rather invest in feasible projects that can benefit agriculture as a whole. -Dr Frikkie Maré, UFS
For more information, send an email to Dr Frikkie Maré at MareFA@ufs.ac.za.