Operationalising existing agriculture policy is key for growth and job creation in South Africa.

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  • The policy agenda for growing South Africa’s agricultural sector has been clear as far back as 2012 when the National Development Plan (NDP) was released. The NDP sketched out a number of sectors in the economy with high potential for labour-absorbing growth. One such subsector was horticulture, which, among others, had the capacity to grow and create employment along the value chain, including off-farm activity and in agro-processing.

 

  • Seven years after the NDP was crafted, nothing has fundamentally changed with respect to the growth opportunities that horticulture presents. In fact, global demand for horticulture and protein-rich food products has increased notably over this period. With this, South Africa’s agricultural exports have also increased, amounting to US$10.6 billion in 2018, representing a 17% increase from 2012, the year of the release of the NDP.

 

  • The gains have largely been underpinned by the subsectors that were identified as potential drivers of South Africa’s agricultural economy – namely horticulture as already discussed, as well as wine, grains and wool, amongst others. But the growth in exports has not been evenly distributed from a geographic and spatial point of view. In fact, growth has been concentrated in traditionally agriculture active areas, while the former homelands have seen sporadic improvement over time.

 

  • In our field visits in the Eastern Cape last week, where we interacted mainly with new-generation farmers with an objective of understanding the developments at farm level in the province, the constraints that came out repeatedly were not different from those expressed by agribusiness firms and farmers in other provinces. These included the lack of access to finance, challenges regarding land governance in the communal areas, access to water, need for farming advice (effective extension services) and poor infrastructure.

 

  • This means that if South Africa is to attain its rural economic growth and job creation ambitions, the country does not need to re-invent a new vision of creating vibrant rural economies. Rather, the focus needs to be on crafting specific strategies which seek to resolve the prevailing constraints that hinder progress, such as the aforementioned ones from Eastern Cape’s farmers.

 

  • Targeting specific bottlenecks entails more effective coordination between the established agribusinesses, farming enterprises, communities, finance institutions and government (national and local).

 

  • This approach is premised on the assumption that there is universal buy-in on the vision articulated in the NDP. However, often times, the message and vision at the national government level are not always received with the same level of enthusiasm at local government levels. Policy coordination across the different levels of government is an area which requires improvement.

 

  • Agribusinesses and farmers have in various forums expressed a willingness to collaborate with the government in growing South Africa’s agricultural sector. This willingness should be welcomed as it promises to address some of the challenges that currently exist at the farm level, such as skills transfer, access to finance and also links to market, amongst others.

 

  • There are areas where this approach has started to bear fruits. Within the Eastern Cape, the blended finance approach of the provincial government, has sparked agricultural development in lands that were underutilised for decades, and thus increasing value and creating extra jobs.   In the Free State, livestock farmers have also started collaborating with emerging black farmers with an aim to bring them into the formal market and growing the industry. The government has also supported some of the initiatives through the Jobs Fund.  

 

  • Encouragingly, this public-private partnership approach appears to be receiving more attention recently, with the National Treasury’s recent economic policy discussion paper highlighting the need for a joint-venture approach to drive development in South Africa’s agricultural sector. This should receive increased focus in the coming months as its success would ensure that the bigger ambitions articulated in policy papers actually translate to development at farm level and communities.

 

  • There are, of course, broader policy questions such as land reform policy and water rights which will need to be attended to concurrently with the other development strategies. Even these specific areas require the realisation that, in order to attract investment into agriculture, property rights are key.

 

  • Overall, the path for growth and job creation in agriculture has been clear for some time. What is needed is an increased effort in coordinating and implementing strategies and programs that address specific constraints and bottlenecks in order to unlock the sector’s growth potential.

 

South Africa’s winter crops harvest estimates revised down

 

  • The dry and warm weather conditions experienced in the Western Cape since the end of August 2019 have taken a toll on winter crops and the impact is evident at a national level given the significance of the province. Last week, South Africa’s Crop Estimates Committee (CEC) lowered its estimates for 2019/20 wheat, barley and canola production by 6%, 3% and 14% from last month to 1.81 million tonnes, 389 260 tonnes and 88 800 tonnes, respectively. Aside from the Western Cape, most other winter crop producing provinces harvest expectations are somewhat stable compared to levels seen in August. Read more on the attached

South Africa’s summer crop production: focus shifting towards the 2019/20 production season

 

  • The CEC didn’t present any surprises when it released its eighth 2018/19 summer crop production estimates last week. Maize, soybeans and sunflower seed production are estimated at 11.1 million tonnes, 1.2 million tonnes and 680 940 tonnes, which are 11%, 24% and 21% lower than the previous season. This notable decline is because of poor yields as a result of dryness in most parts of the country during the season.

 

  • Against this backdrop, South Africa will be a net importer of soybeans and sunflower seed, while on maize will remain a net exporter. We forecast maize exports at 1.1 million tonnes, which is a decline of about half from the previous 2018/19 marketing year (this corresponds with 2017/18 production year).

 

  • Looking ahead, the focus is shifting towards the 2019/20 production season which commences around mid-October 2019, as shown in Figure 2. In fact, a few areas in the eastern parts of the country have started with soil preparations. We expect to see increased momentum in plantings after the first rains, which will most likely commence at the end of October into November, according to estimates from the South Africa Weather Service. 

 

South Africa’s food producer price inflation slowed in August

 

  • After accelerating for 12 consecutive months, South Africa’s food price inflation slowed to 5.4% y/y in August 2019 from 6.1% y/y in July (Figure 3 in the attached file). This was underpinned by a decline mainly in meat, dairy products, oils and fats producer prices. In the case of meat, the decline in prices is somewhat reflective of an increase in supply, cattle and sheep slaughtering activity improved by 13% and 11% from the previous months to 214 471 head and 361 783 head, respectively. Going forward, however, we think the general uptick in global meat price inflation will provide support to the local market. However, in terms of dairy products, producer prices are likely to slow in the coming months as supply typically improves in summer when grazing veld has recovered. 

 

 

  • On Monday, the U.S. Department of Agriculture will release the US crop conditions data. This will give us a sense of the US crop-growing conditions.

 

  • On Wednesday, SAGIS will release the grain producer deliveries data. While the data will present producer deliveries data for the week of 27 September 2019, it essentially gives us an indication of the volume of summer grains and oilseeds that have been delivered to commercial silos after the harvest process.

 

  • On Thursday, we will get the weekly grain trade data (wheat and maize) for the week of 27 September 2019. Briefly, in terms of maize, the exports of the 2019/20 marketing year have thus far amounted to 463 153 tonnes. Looking ahead, we expect South Africa to remain a net exporter of maize this year, although the volume will most likely fall by half from the previous year to about 1.1 million tonnes, as previously noted. At the same time, we expect imports of about 450 000 tonnes, all yellow maize, mainly for the coastal provinces of the country. This is up from an estimated 171 500 tonnes in the 2018/19 marketing year. The country has thus far imported 251 708 tonnes of yellow maize, all from Argentina.

 

  • In terms of wheat, South Africa remains a net importer, although the recovery in the country’s 2018/19 domestic wheat production will lead to a decline in imports this season. South Africa’s 2018/19 wheat imports could fall by 36% from the previous season to about 1.4 million tonnes. So far, the country has imported about 87% of the seasonal forecast. The leading suppliers include Germany, Russia, Lithuania, Canada, the Czech Republic and the US.