Agriculture remains one of the success stories in SA’s economic progress, irrespective of the challenges the country has faced over the past few decades.
While primary agriculture’s share in the economy has declined from about 10% in the 1960s to just under 3% today, the sector has grown tremendously in real terms. This share decline only illustrates the classic story of how the SA economy has advanced over time, with industries such as finance, manufacturing and transport having grown far faster than agriculture.
Still, the interlinkages of primary agriculture with manufacturing (agro-processing) make it an integral part of this economic transformation story. Over the past decades growth has been underpinned by the adoption of new production technologies, better farming skills, growing demand (locally and globally), and a progressive trade policy.
This was made possible by a range of trading agreements the government secured over the past couple of years, the most important being in the African, European and Asian regions. The African continent and Europe now account for about two-thirds of SA’s agricultural exports. Asia is also an important market for SA’s agricultural exports with a roughly 25% export share.
The private sector has been core to the SA agriculture success story, while government has had to ensure that policy remains favourable for investors and farmers. The priorities for the government were to ensure there are no interventionist trade policies (blocking exports) or price caps, and that infrastructure (roads, rail, water and electricity) is in place, strong protection of property and proper land governance.
Being open to scientific advancements in seed breeding and agrochemicals and genetics are some of the positives the SA government ensured. This was all anchored in the sound financial system that supported commercial production and international trade.
For the first two decades since democracy the infrastructure was fully operational and supportive of the sector. But the past nine years have seen deteriorations that have seen even greater reliance on the private sector and these present long-term risks if not addressed.
Still, these private sector efforts, collaboratively with a favourable policy environment, ensured that SA’s agriculture continued to perform excellently even during the Covid-19 crisis Good weather conditions also made a contribution.
In 2021 and 2022 SA’s agricultural exports in terms of volumes and value broke records, reaching $12.8bn in 2022. Our export basket is diverse, with fruits, wine, grains, beef and wool topping the list.
These policy measures and strong private sector participation differentiate the SA agriculture story from much of the continent. For example, whereas SA’s Agricultural Food System (AFS) share (primary agriculture and agro-processing) of GDP adds up to about 10%, with the private sector leading, in most African countries the AFS share of GDP is well above 30%-40% and much of the development is driven by government.
The SA government supports private sector investment by providing the essential service delivery that any government is supposed to perform. Inclusivity is crucial, and here government has a tremendous opportunity (which we hope can be realised through the country’s newly launched Agriculture & Agro-processing Master Plan) to leapfrog the development of a multitude of businessmen and women who are already in the sector but require support in terms of credit extension and infrastructure. This “hidden middle” holds potential for employment generation and bringing vibrancy to rural towns.
SA’s agriculture doesn’t have all of its house in order. We have our challenges. For example, government has fallen short in delivering a range of basic services — water, roads, rail and ports — that now present risks for the long-term growth prospects of the sector if there is no urgent intervention. We are also seeing rising crime, which is a risk to investment. Our energy issues also present challenges for farmers and the food sector.
That said, in SA both government and the private sector have a plan for the next decade through the Agriculture & Agro-processing Master Plan, which speaks to direct value change and regional requirements to boost the growth of this sector. This will entail resolving policy ambiguity, creating an enabling infrastructure, providing farmer support and supporting research & development, financing through a blended finance structure, and expanding export markets.
We also encourage farmers to focus on high-value, labour-intensive crops for export to ensure the agricultural sector helps address unemployment. This will require that government fully utilises its over 2-million hectares of underutilised land, focusing on promoting commercial production and small-scale farming only where conditions do not permit commercialisation.
What can other African countries take from SA’s agricultural story?
Limited trade and commodity price interventions are essential to enable more private sector investments to drive market corrections in instances of price swings.
Investment in infrastructure is critical. This includes both institutional infrastructure and physical/hardware infrastructure that can reduce the costs of doing business.
Embracing technological advancements in seeds, genetics and agrochemicals is vital in boosting productivity. Policy interventions that promote access to these technologies and create market systems that can deliver these technologies efficiently, at low cost, make farming competitive.
Supporting commercial farming, which will be essential for the growth of the agro-processing part of countries’ food systems and a source of employment, is a critical step for agricultural progress in Africa.
• Sihlobo is chief economist at the Agricultural Business Chamber of SA and a senior fellow in Stellenbosch University’s department of agricultural economics. This is an edited version of his address at the World Bank’s Africa Agriculture Policy Leadership Dialogue in Lusaka, Zambia, last week.
