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Can the agricultural sector save South Africa’s economy?

Farming on the prospects for growth is a challenge for us all, writes John Hudson.

While the emphasis of President Cyril Ramaphosa’s State of the Nation Address (SoNA) was on growing the economy and creating jobs, the agricultural sector was handed what is probably the biggest challenge.

Ramaphosa wants to reduce reliance on imports by 20% over the next five years. While 42 products, largely in manufacturing, have been identified to pursue this initiative, agriculture has a key role to play in boosting local production of edible oils and fruit, and contributing to the green economy inputs.

He forecasts a R200 billion gain to the economy thanks to the local production thrust. But it should be accompanied by government interventions that will make business seamless without the plethora of legislative requirements.

 More than just hatching a plan on ambition, Ramaphosa is buoyed by the implementation of a poultry master plan that has already seen R800 million spent on upgrades for production. As a result, South Africa currently produces an additional one million chickens a week. 

The master plan for sugar, signed during the lockdown, has a sweetener. Large sugar users have agreed to procure at least 80% of their sugar needs from local growers. According to Ramaphosa, through the implementation of the plan, there was an increase in local production and a decline in imported sugar last year, creating stability for an industry that has about 85 000 employees.

Support for black small-scale farmers is being stepped up, with a large beverage producer committing to expand their procurement sharply. Given the unhappiness expressed by the alcohol industry during the lockdown, some may say this a step in the right direction. The Blended Fund Scheme is a public-private partnership (currently under negotiation), and if a consensus is reached between key stakeholders, this could pave the way to improved access to finance for qualifying farmers and agribusinesses, which is another step in the right direction.

But is agriculture up to the challenge and can the sector ignite a recovery in the broader economy? At Nedbank, we believe that agriculture has repeatedly shown its resilience and it has the will and the resolve to take up the challenge. However, an uneasiness and level of uncertainty remains and, unless resolved, will prevent the sector from truly shining and delivering on its potential.

The liquidity challenge facing Land Bank and the potentially devastating impact this could have on the sector is still an issue, as are other areas that require urgent attention. These include land and water reform; climate change; investment in infrastructure (water, electricity, transport and logistics); access to markets (new and existing); access to finance and food waste. If these fundamentals are not addressed, we run the risk of losing our way and sinking further into a state of disarray and instability. Will we see tangible progress in 2021 or continued paralysis?

The urgency in making tangible progress is no more evident than in the citrus sector. According to Justin Chadwick from the Citrus Growers Association, export volumes are expected to increase from the current 146 million cartons (15kg a carton) to around 230 million cartons by 2031. This growth is quite staggering and is on the back of substantial private-sector investment in production, equipment, packing and logistics. But together with this investment, government must play its role in infrastructure upgrades (ports, roads and rail), access to new markets (trade agreements) and managing the Covid-19 pandemic with consideration given to preferential vaccination of farm workers. 

In his latest Agricultural Market Viewpoint, Wandile Sihlobo, respected chief economist at the Agricultural Business Chamber (Agbiz), says South Africa’s agricultural exports registered the second-largest level on record in 2020. ‘South Africa's agricultural exports amounted to $10,2 billion in 2020, which is a 3% increase from the previous year. This is the second-largest level after the record exports of $10,7 billion in 2018. The exports were primarily underpinned by large domestic agricultural output, which was supported by favourable weather conditions. The relatively weaker domestic currency also made South Africa's agricultural products more competitive in the global market. The top ten exportable products by value were citrus, grapes, wine, apples and pears, maize, nuts, sugar, wool and fruit juices,’ he adds.

Looking ahead, he says that there is also general optimism about the 2021 harvest in horticulture and other field crops like sugar, which supports the view of a possible increase in agriculture exports this year. The improved favourable conditions have led to an increase in summer crop area plantings and prospects of a larger maize harvest than in 2019 and 2020, which will enable more exports, particularly given the context of strong demand and somewhat low stock levels. South African wine grape production is also set to be greater than in 2020, and while this could pressure on stocks, the uptick in production could contribute to a larger wine volume for exports.

Overall, the message to agriculture was a mixed bag: an acknowledgement of the farming potential to create jobs and foster growth, yet a hazy view on land policy and support programmes for land reform beneficiaries. There may also be an over-reliance on the master plans, and time will tell if they will genuinely deliver on their promise.

New Agri SA Executive Director, Christo van der Rheede, says Ramaphosa has presented arguably his most important SoNA owing to the unprecedented global Covid-19 pandemic. According to Agri SA, he outlined a four-point focused plan: defeating Covid-19, accelerating economic recovery, implementing economic reforms to create sustainable jobs and drive inclusive growth, as well as fighting corruption.

 Three of these are not new, and Agri SA has continued to reinforce that South Africa is not policy bankrupt but remains challenged by the timeous and effective implementation thereof,’ says van der Rheede.

During the pandemic the resilient agricultural sector successfully showed that South Africa can reap what it sows Consequently, the President was clear ⁠- it’s time for all of us to roll up our sleeves and get to work.

 

John Hudson is the National Head of Agriculture at Nedbank.

AFRIKAANS 

Kan die landbousektor Suid-Afrika se ekonomie red?

Boerdery met die vooruitsig vir groei, skryf John Hudson.

 Hoewel President Cyril Ramaphosa se staatsrede die klem op ekonomiese groei en werkskepping gelê het, het die landbousektor waarskynlik die grootste uitdaging gekry.

Ramaphosa wil die afhanklikheid van invoer oor die volgende vyf jaar met 20% verminder. Terwyl 42 produkte, hoofsaaklik in vervaardiging, geïdentifiseer is om hierdie inisiatief na te jaag, speel die landbou 'n sleutelrol in die bevordering van plaaslike produksie van eetbare olies en vrugte, en dra dit by tot die insette vir die groen ekonomie.

Hy voorspel 'n wins van R200 biljoen vir die ekonomie danksy die plaaslike produksiekrag. Maar dit moet gepaard gaan met ingrypings van die regering wat sake maklik sal maak sonder die oorvloed wetlike vereistes.

Buiten die feit dat dit ’n baie ambisieuse plan van Ramaphosa is, is hy ook opgewonde oor die implementering van 'n pluimveemeesterplan, wat reeds R800 miljoen aan opgraderings vir produksie bestee het. Te danke hieraan, produseer Suid-Afrika tans 'n ekstra miljoen hoenders per week.

Die meesterplan vir suiker, wat tydens die inperking onderteken is, smaak nog soeter. Groot suikerverbruikers het ingestem om minstens 80% van hulle suiker by plaaslike produsente te bekom. Volgens Ramaphosa was daar verlede jaar, deur die implementering van die plan, 'n toename in plaaslike produksie en 'n afname in ingevoerde suiker, wat stabiliteit skep vir 'n bedryf wat ongeveer 85 000 mense in diens het.

Ondersteuning vir swart kleinskaalse boere kry 'n hupstoot, met 'n groot drankprodusent wat daartoe verbind is om hulle aankope aansienlik te verhoog. Gegewe die ongelukkigheid van die alkoholbedryf tydens die inperking, kan dit 'n stap in die regte rigting wees. Die Blended Fund-skema is 'n openbare-privaat vennootskap (hulle onderhandel tans), en as konsensus tussen belangrike belanghebbendes bereik word, kan dit die weg baan vir verbeterde toegang tot finansiering vir kwalifiserende boere en landboubesighede, wat nog 'n stap in die regte rigting is.

Maar is die landbousektor opgewasse vir die uitdaging en kan die sektor herstel in die groter ekonomie aanvuur? John Hudson, Nasionale Hoof van Landbou by Nedbank, meen dat die landbou herhaaldelik sy veerkragtigheid bewys het, en dat die sektor die wil en voorneme het om die uitdaging aan te pak. Daar heers tog onrustigheid en onsekerheid, en as dit nie eers opgelos word nie, sal dit voorkom dat die sektor werklik uitstyg en sy volle pontensiaal bereik.

Die likiditeitsuitdaging wat Landbank in die gesig staar en die moontlike vernietigende impak wat dit op die sektor kan hê, is steeds 'n probleem, net soos ander gebiede wat dringend aandag verg. Dit sluit in grond- en waterhervorming; klimaatverandering; belegging in infrastruktuur (water, elektrisiteit, vervoer en logistiek); toegang tot markte (nuwe en bestaande markte); toegang tot finansiering en voedselvermorsing. As hierdie grondbeginsels nie aangepak word nie, loop ons die gevaar om koers te verloor en verder in 'n toestand van wanorde en onstabiliteit te verval. Sal ons in 2021 tasbare vordering of voortgesette verlamming sien?

Die dringendheid om tasbare vordering te maak is baie duidelik in die sitrussektor. Volgens Justin Chadwick van die Sitruskwekersvereniging sal uitvoervolumes na verwagting teen 2031 vanaf die huidige 146 miljoen kartonne (15kg per karton) tot ongeveer 230 miljoen kartonne styg. Dié groei is verbysterend en te danke aan aansienlike beleggings van die privaat sektor in produksie, toerusting, verpakking en logistiek. Maar tesame met dié belegging moet die regering sy rol speel in die opgradering van infrastruktuur (hawens, paaie en spoorweë), toegang tot nuwe markte (handelsooreenkomste) en die bestuur van die Covid-19-pandemie, en voorkeur-inenting van plaaswerkers in ag neem.

 Wandile Sihlobo, gerekende hoofekonoom by die Landboubesigheidskamer (Agbiz), sê in sy jongste standpunt oor die landboumark dat Suid-Afrika se landbou-uitvoere in 2020 die tweede grootste vlak geregistreer het. 'Suid-Afrika se landbou-uitvoer het in 2020 $10,2 biljoen beloop, wat 'n toename van 3% van die vorige jaar is. Dit is die tweede grootste vlak na die rekorduitvoer van $10,7 miljoen in 2018. Groot binnelandse landbouproduksie het hoofsaaklik die uitvoer aangedryf, en gunstige weersomstandighede het daartoe bygedra. Die betreklik swakker binnelandse geldeenheid het Suid-Afrika se landbouprodukte ook meer mededingend op die wêreldmark gemaak. Die tien beste uitvoerbare produkte volgens waarde was sitrus, druiwe, wyn, appels en pere, mielies, neute, suiker, wol en vrugtesap,’ voeg hy by.

Vooruitskouend sê hy dat daar ook algemene optimisme bestaan oor die 2021-oes in tuinbou en ander veldgewasse soos suiker, wat die siening van 'n moontlike toename in vanjaar se landbou-uitvoer steun. Die gunstiger toestande het gelei tot 'n toename in die aanplantings van die somergewasgebiede en die vooruitsig van 'n groter mielie-oes as in 2019 en 2020, wat meer uitvoer moontlik sal maak, veral gegewe die konteks van 'n sterk aanvraag en ietwat lae voorraadvlakke. Die produksie van Suid-Afrikaanse wyndruiwe sal waarskynlik ook groter wees as in 2020, en hoewel dit die voorraad kan druk, kan die toename bydra tot 'n groter wynvolume vir uitvoer.

 Oor die algemeen was die boodskap aan landbou 'n mengelmoes: erkenning dat boerdery werk kan skep en groei bevorder, maar tog 'n wasige siening oor grondbeleid en ondersteuningsprogramme vir begunstigdes van grondhervorming. Daar kan ook te veel vertroue op die meesterplanne wees, en tyd sal leer of hulle werklik vrugte sal werp.

 Nuwe uitvoerende direkteur van Agri SA, Christo van der Rheede, sê Ramaphosa het weens die ongekende wêreldwye Covid-19-pandemie waarskynlik sy belangrikste staatsrede nog gelewer. Volgens Agri SA het hy 'n gefokusde plan met vier punte uiteengesit: om Covid-19 te verslaan, ekonomiese herstel te versnel, ekonomiese hervormings deur te voer om volhoubare werkgeleenthede te skep en inklusiewe groei te dryf, asook om korrupsie te beveg.

‘Drie hiervan is nie nuut nie, en Agri SA benadruk steeds dat Suid-Afrika nie 'n tekort aan beleide het nie, maar die tydige implementering daarvan bly 'n uitdaging,’ sê Van der Rheede.

Tydens die pandemie het die veerkragtige landbousektor bewys dat Suid-Afrika kan maai wat hy saai. Die president se boodskap was dus heel duidelik – dit is tyd dat ons almal ons moue oprol en aan die werk spring.

John Hudson is die Nasionale Hoof van Landbou by Nedbank.


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