To understand the challenges farmers face it’s necessary to spend a considerable amount of time talking to them, to get a better feel of the markets.
In such engagements this past week one theme that came up time and again is the need to diversify export markets to non-traditional regions, while retaining the sector’s foothold in key markets such as the EU.
Other issues that keep farmers awake at night are the need to improve logistics — road, rail and ports — the expansion of agricultural finance, particularly developmental finance or flexible finance products for new entrants, and strengthening trust between government and the industry.
The need for new export markets has become increasingly urgent as agricultural output consistently improves while the country has limited capacity to absorb new produce. SA already exports half of its produce in value terms. Therefore, if the Agriculture & Agro-Processing Master Plan is to boost production it must emphasise the expansion of exports.
Japan, China, India, Saudi Arabia, Bangladesh, the Philippines and South Korea are among the markets where SA agribusinesses are interested in expanding their presence. Recent actions from the EU and China (two of the largest export destinations at present) to put non-tariff barriers in place, hurting SA’s interests and export activities, highlight the importance of diversifying destination markets.
Resolving the above two challenges isn’t the job of the private sector or organised agriculture alone. Government should work with the sector to create an “SA Inc.” plan for widening exports. The building blocks for such a plan are already in the master plan. Still, given the urgency of this matter SA needs a dedicated working group to champion the expansion of the country's agricultural exports and work towards servicing existing markets to avoid challenges such those faced by the citrus industry in the EU or wool in China.
The need for network industry improvements was highlighted by many farmers who noted there haven’t been material improvements, particularly on roads, for many years. The agricultural sector is in regular conversation with Transnet regarding the effectiveness and efficiency of the country’s ports. So far Transnet has been open to engagements and efficient in resolving challenges such as rebuilding the port of Durban following the destructive floods.
Private sector participants also want to explore better partnerships in the various nodes of the ports, which could help improve efficiencies, not only for agriculture but a range of industries such as mining and automobile.
Agricultural finance is another topic that has received attention in various engagements. This encompasses the blended finance programme led by the department of agriculture, land reform & rural development, which should be open to all agribusinesses and financial institutions. Separately, the Land Bank could also play a major role in supporting new farmers to the sector as well as existing commercial farmers.
This area will require increased focus during phase two of implementing the sector master plan. The blended finance instrument from government should include all agribusinesses and financial institutions in the sector.
Land Bank
At the same time, government should support the reform of a critical developmental finance institution such as the Land Bank, which has a long history in the sector. The goal should be to build agricultural finance instruments that help grow the agriculture and agribusiness sectors of “SA Inc.”
The broad issues of trust and accountability, as well as monitoring and evaluation, are crucial to building credibility. This is trust both among sector role players and with government. The first step in building trust will be to deliver on promises or various aspects affecting the sector.
The government can lead in this effort by implementing reforms outlined in the sector master plan, particularly the parts that do not require capital spending but do need legislative amendments.
These could include aspects of the Agricultural Product Standards Act of 1990 (for instance, the thorny issue of assignees the industry does not desire or view as value adding to the sector) and aspects of the need for the modernisation of the Fertilisers, Farm Feeds, Seeds & Remedies Act of 1947 (there is already work under way in this area, which could be accelerated). It could mean intensifying efforts to open more export markets for SA agriculture.
The steps government needs to take were summarised in a presentation we made in 2021:
Implement all the regulatory interventions that require less capital and provide consistent updates to social partners;
Reprioritise the department’s budget in line with the master plan interventions, which will signal the government’s commitment to ensuring the plan’s success;
Support state entities such as Transnet to improve the effectiveness of the ports;
Work closely with the National Treasury to resolve the Land Bank’s financial challenges so that it can play an influential role as outlined in the master plan;
Intensify efforts to open more export markets for SA agriculture;
Release land held by the government to new beneficiaries with long-term tradable land rights or title deeds; and
Root out corruption at various levels within the department to ensure the effectiveness and efficiency of staff.
What should the private sector do?
Build trust among various farmer organisations and agribusiness to have a unanimous voice to speak to government;
Recognise the need for collaborative efforts in rebuilding SA and expanding the agriculture and agribusiness sectors. This could be through a partnership with new farmers in the development programmes of various commodity organisations; and
Showcase and expand partnership programmes that have proved successful in various commodities and parts of the country.
These are not exhaustive but we believe they are interventions that could move the needle in terms of translating the ideas in various plans into tangible projects that could contribute to growth and job creation in SA agriculture.
The agricultural sector faces numerous challenges, which are now well understood by both the government and the various industry stakeholders. SA needs a plan of action, particularly on the four areas of interventions that were consistently outlined in various farmer and agribusinesses engagements we had this past week.
These are the same issues that bothered sector role players a year ago, which means we haven’t yet done enough to make a difference. Since agriculture is one of the sectors that will help grow the economy,k increased attention on the reforms necessary to unlocking inclusive growth and consequent job creation is required.
• Sihlobo is chief economist at the Agricultural Business Chamber of SA.
