There is so much in the implementation pipeline of South Africa’s agriculture policy this year.
The past four years have largely seen various initiatives that sought to inject confidence in the sector. These are now ripe for implementation, especially ahead of the 2024 general elections. A major development in recent times was the launch of the Agriculture and Agro-processing Masterplan, which offers government and the private sector a new possibility to grow the sector, build competitiveness, attract more investment, and ensure inclusion.
More concretely, the Department of Agriculture, Land Reform and Rural Development (DALRRD), launched a blended finance instrument that had been in the works for a few years now. This is a joint initiative with the Land Bank and the aim is to broaden participation by other financing agencies to achieve the required scale to make a positive dent in transforming the sector. During various addresses, President Cyril Ramaphosa underlined the soon-to-be launched Agricultural Development and Land Reform Agency under the leadership of Minister Thoko Didiza. In the past, these programmes seemed like a pipe dream. Now they are nearing implementation. There is a window of opportunity for the government to show results in these areas since they are beyond policy development and ripe for action. If implemented effectively, these programmes could boost growth in the sector, sustain employment, and possibly attract new investment.
This year, the focus should be firmly on implementation. Admittedly, to some stakeholders, it may feel like there has been little progress on all the above programmes since the year started. The deterioration in the electricity crisis has been a major cause of the delay. To this end, we hope that Minister Didiza's Agriculture Energy Task Team’s outcomes are soon tabled to the sector to provide guidance on practical near-term interventions to limit the damage of the crisis on intensive energy-consuming farming businesses.
As interventions to mitigate against the energy crisis are ramped up, more energies should be directed towards widening the blended finance to include a diverse range of other financial organizations as well as to identify other financing gaps that were previously unforeseen. It is important throughout the implementation of the various government programmes that the relationship between the government and the private sector is strengthened since it is not possible to achieve any meaningful outcomes without collaboration. For example, the success of the Agriculture and Agro-processing Master Plan depends on accessibility of affordable finance for new entrant farmers and agro-processing entrepreneurs.
Simultaneously, the DALRRD will need to launch its Agricultural Development and Land Reform Agency, outlining its mandate and working plan for its first five years in collaboration with the private sector. Given that new entrant farmers to the sector will require access to land with title deeds or tradable long-term leases, launching the Agency is a pre-requisite for the comprehensive implementation of the Agriculture and Agro-processing Master Plan.
If the DALRRD fails to launch the Agency sooner, the deliberations in implementing the Master Plan will always go back to land needs as a hindrance. Therefore, the government should unlock all these possible stoppages before advocating for a comprehensive implementation of the Master Plan, possibly in the second half of this year. The technical team of the Agriculture and Agro-processing Master Plan could use the remaining four months of the first half of this year to resolve outstanding matters that social partners such as labour were not comfortable signing on last year.
These implementation steps are also vital for building trust and progress in the sector, not only between the government and existing role-players in agriculture, but also other South Africans who aspire to join the sector and have followed these programmes from inception with hope for inclusion and economic opportunities. Notably, the sector's stakeholders will also be more appreciative of the seriousness of government programmes and policy if there is a full-scale implementation of all these programmes. There may be faults at the starting stages, which provides us with an opportunity to learn and improve policy and programme design along the way.
The agricultural sector has maintained positive growth momentum in recent years, partly because it was well positioned to take advantage of a favourable weather conditions. It is crucial to build on this momentum to implement the programmes we outlined above this year. Failure to move forward risks placing South Africa's agriculture and agribusiness on a lacklustre path of growth in 2024. The 2023/24 season will have challenges, such as the potential El-Nino-induced drought, which could sap the energy of the sector and place role players in "survival mode". Therefore, we now have the right set of conditions to implement with speed.
Weekly highlights
A notable jump in SA consumer food price inflation
After While in some regions of the world, consumer food price inflation has started to cool off; South Africa sees the opposite. The data released last week by Statistics South Africa shows that consumer food price inflation accelerated to 13,8% y/y in January from 12,7% in the previous month. The food product prices that increased notably were bread and cereals, meat, fish, fruit and vegetables. These are also the products with a significant weighting within the food basket; thus, we see a notable increase in the headline number. For example, within the food basket, the large weighting of essential products are meat (35%); bread and cereals (21%); milk, cheese and eggs (17%); vegetables (8%); sugar, sweets and desserts (4%); oils and fats (3%); and fruit (2%).
The price increases in bread and cereals reflect a continuation of the pass-through of the price increases that food manufacturers have felt from the higher agricultural commodity prices in much of 2022. There is typically a time lag of roughly three to five months before changes in farm prices show up in the retail prices of staple grains; hence, while some grain prices started to soften in December 2022 but retail prices are still going up. In the case of meat prices, the higher feed costs and the decline in slaughtering activity due to the widespread foot and mouth disease, continue to be underlying challenges driving up prices. This is most pronounced in red meat. Meanwhile, the heavy rains that disrupted production conditions in fruits and vegetables contributed to lower supplies of some products in the first month of this year and, subsequently, price increases.
The production costs associated with load-shedding might not have been fully factored in the January figures and are likely to show in the coming months. We have stated previously that the disruptions caused by power supply interruptions to some food processing companies as well as the associated cost increase all present upside risks to consumer food price inflation. Before this intensified load-shedding period, we thought South Africa's consumer food price inflation would slow to 5,5% - 6,0% in 2023 (down from 9,5% in 2022).
We have since revised our view. We now see a possibility of a slightly higher figure from these estimates we communicated. However, our updated view will be in the next release when we have a clear sense of the scale of agricultural disruption and the broader food, fibre and beverages value chains. Broadly, the agricultural conditions are favourable for grains and oilseeds. The load-shedding risk and associated costs are high, mainly in fruit and vegetables that are fully produced under irrigation and in the poultry sector, dairy, abattoirs, millers, and various food processors.
Data releases this week
As always, we start the week with a global focus, and as with the previous week, the calendar looks relatively quiet with one major release, the USDA's US Weekly Grains and Oilseeds Exports, which is due for release on Friday.
On the domestic front, on Wednesday, SAGIS will release the Weekly Producer Deliveries data for 17 February. In the previous release of 10 February, about 14,4 million tonnes of maize had already been delivered to commercial silos, out of the harvest of 15,5 million tonnes. In the same week, about 2,2 million tonnes of soybeans had already been delivered to commercial silos, roughly the same size as the harvest for the season. Moreover, 840 528 tonnes of sunflower seed had already been delivered on the same day out of the harvest of 845 550 tonnes. The 2022/23 wheat producer deliveries amounted to 1,9 million tonnes in the same week, out of the expected harvest of 2,2 million tonnes.
On Thursday, SAGIS will publish the Weekly Grain Trade data for 17 February. In the previous release on 10 February, which was the 41st week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 20 417 tonnes, all to the Southern Africa region. This brought the total 2022/23 exports to 2,7 million tonnes out of the seasonal export forecast of 3,3 million. This is slightly down from 3,7 million tonnes in the past season due to an expected reduction in the harvest.
South Africa is a net wheat importer, and 10 February was the nineteenth week of the 2022/23 marketing year. The weekly imports amounted to 35 899 tonnes, all from Brazil. South Africa's 2022/23 wheat imports currently stand at 557 149 tonnes. The seasonal import forecast is 1,6 million tonnes, roughly unchanged from the previous season. The major wheat suppliers in the 2021/22 season are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US. If one looks into South Africa's wheat import data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly. Argentina and Brazil replaced this in the 2021/22 season. We will closely monitor Russia's presence in the 2022/23 season, as the country is again one of the major wheat suppliers to South Africa.
Also, on Thursday, Statistics South Africa will release the Producer Price Index (PPI) Weights data for 2023, as well as the Producer Price Index (PPI) data for January 2023. Our focus on these data will primarily be on the food category, whose prices remain quite elevated.
