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Action plan seen as offering practical remedies for unblocking agriculture’s growth, jobs potential

AGRICULTURE ANSWER TO GROWTH? Agriculture has been elevated for economic development and as a socioeconomic response to South Africa’s challenges – poverty, inequality and unemployment

Photo by Duane Daws

JOHANNES MÖLLER South Africa cannot continue having a significant number of people moving to the cities every year

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SENZENI ZOKWANA Government’s vision is to grow the agriculture’s contribution to gross domestic product beyond the current 2.7%

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NICO GROENEWALD There are still opportunities for South African primary producers and agribusinesses to prosper

GUGILE NKWINTI Has been tasked to coordinate Outcome 7 of the Medium-Term Strategic Framework, which is based on Chapter 6 of the NDP

Photo by Duane Daws

28th November 2014

By: Tracy Hancock

Creamer Media Contributing Editor

  

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The presentation on the Agriculture Development Action Plan by Department of Agriculture, Forestry and Fisheries director of programme development support Rowena Joemat at the Agri SA Congress.  (1.22 MB)

The Department of Agriculture, Forestry and Fisheries (Daff) has unveiled a draft version of the Agriculture Policy Action Plan (Apap), which is aligned with the National Development Plan’s (NDP’s) target of creating one-million agricultural-sector jobs by 2030. The aspiration is outlined in Chapter 6 of the NDP, which provided the backdrop for recent government–industry engagement at Agri SA’s yearly congress.

Apap was formulated as a direct response to the NDP and the New Growth Path, both of which view agriculture as a key jobs driver.
Daff director of programme development support Rowena Joemat explained at the congress in October that agriculture had been elevated in new ways, both for economic development, but also as a socioeconomic response to South Africa’s challenges of poverty, inequality and unemployment.

Apap was a programmatic response to the country’s integrated growth and development policy, Joemat said, pointing out that it was a five-year plan that sought to provide long-term focused interventions and, as with the Industrial Policy Action Plan (Ipap), would be reviewed annually.

Similar to Ipap, Apap would be based on sectoral and transversal key action programmes, while for each of the identified commodities, the plan included a problem statement, aspirations, policy levers, nature of interventions and key outputs.

For example, according to Bureau for Food and Agricultural Policy (BFAP) figures, a 34% increase in the consumption of poultry was projected, which translated into 2.6-million tons, resulting in a shortfall of 680 000 t, as South Africa was currently capable of producing about two-million tons.

Joemat highlighted that the department was also concerned about the agriculture sector’s high dependency on imported feed grains, particularly soya and yellow maize, noting that animal feed prices had been increasing by about 130%, with 63% now supplied through imports.

“We have problematised each commodity and seek to intervene at very specific areas. The most important strategic value of Apap is that it tries to identify where government needs to provide support. So, instead of doing everything for everyone from communal areas, it now seeks to intervene strategically [and] we need to identify those strategic interventions with you. So, through the CEO forum we want to interact with sector organisations to identify the key challenges within the various commodities . . . to support the growth of the sector,” Joemat stated, highlighting the presence of Agricultural Business Chamber CEO John Purchase at the congress.

Agriculture, Forestry and Fisheries Minister Senzeni Zokwana reiterated that agriculture was a key driver of growth for the rest of the economy, stating that government’s vision was to grow the sector’s contribution to gross domestic product beyond the current 2.7%. “To increase this, we must increase investment in the sector and find more markets for our products.”

He added that the reality of food insecurity “cuts very deep”, stressing that to create a sustainable agricultural sector, an environment needed to be created that was conducive to investment and that stakeholders “need to be mindful of the things that inhibit growth in our sector”.

Agri SA newly re-elected president Johannes Möller stressed that South Africa could not continue having a significant number of people move to cities every year, emphasising the importance of stimulating rural development. But he also warned that the creation of an additional one-million jobs in the agricultural sector by 2030 would not be realised should the current environment of reckless strikes persist and should entry-level labour costs continue to increase sharply.

Statistics showed that growth and development of the agricultural sector had slowed over the past year, despite a reasonably favourable climate. However, erratic market conditions were also prevalent. Gross income for the year ended June 30 had increased by 6.7%, while net farm income increased by 3.3% and, regardless of the agricultural sector’s trading conditions improving, in general, debt during the period increased by 23.2% to about R115-billion.

Möller stated that stronger engagement, including in government circles, with regard to the NDP would be a gateway to building trust and long-term economic development, noting that Agri SA, therefore, looked forward to Apap, which was expected to satisfy these needs.

However, he noted that there was currently still too big a gap between the aims of the NDP – which called for an inclusive rural economy wherein rural communities had greater opportunity to participate fully in the economic, social and political life of the country – and current government policies. To address this, he said, other government initiatives regarding land, water, energy, labour and infrastructure also needed to be included under Apap.

But, despite the current challenges, “there is still a positive view of the future of agriculture”, he said.

Way Forward
Joemat said Daff intended to create a producer- and consumer-friendly market structure through Apap.

When discussing policy issues, she stated that, although agriculture may not turn away from mechanisation, the industry could alleviate its overdependence on high-input requirements, noting that climate-smart agriculture could be one of the ways to reduce the dependence on high-input production systems.

Other transversal issues she mentioned included the importance of promoting local food economies, investment in agrologistics, promoting import substitution and export expansion through concerted value chain and commodity strategies.

“We recognise that the department in the past has not been great at strategic commodity development, but think your experience and ability to plan is where we could partner on these things,” Joemat expressed to Agri SA’s members.

Reducing the industry’s dependence on industrial and imported inputs, increasing productive use of fallow land and strengthening research and development outcomes, were also listed.

Support services were also highlighted as important and it was confirmed that Daff was currently reviewing its model. The department believed there was a clear gap in terms of monitoring the effectiveness of the support programmes offered and the impact these programmes had on the sector. Information in this regard should be collected and analysed to assist decision-making in terms of appropriate interventions to address the challenge.

The relationship between Daff and the Department of Land Reform and Rural Development (DLRRD) had also started to be “spatially based, allowing for the identification of land for agricultural zones, which would be targeted for investment.

Joemat explained that the department wanted to identify commodities that would be targeted and determine how land reform and infrastructure investment would complement those investment areas. “Along with BFAP, the National Agriculture and Food Council and the DLRRD, Daff seeks to develop those value chains. [These are] units of work we foresee coming in the future and we are hoping that Apap will grow in this regard.”

She added that knowledge and information management was also critical and that there were “a lot of things we are unable to count”. Therefore, Daff intended to introduce an agricultural information management system in the next year or two.

Jobs and Growth
Calculations undertaken by BFAP showed that 600 000 potential jobs could be created in communal areas and 300 000 potential jobs in the commercial sector.

However, there was concern that, while the NDP and BFAP had calculated the potential of the sector, Joemat also noted a propensity for job-shedding, although 5% growth had been experienced by the sector, “we have shed about 73 000 jobs” year-on-year.

As farming units had been decreasing in number, the size of these units had been increasing and this correlated with job-shedding. Therefore, there was a direct relationship between the structure of the commercial farm sector and job-shedding, she noted, questioning how the growth in the sector could become more inclusive.

Simultaneously, according to the General Household Survey, Joemat said, since 2009, there had been about a 37% increase in the number of smallholders.

Another concern was that there was a growing dominance across the sector. When looking at dairy and grain, the top five and top ten companies were generating about 70% to 80% of the sector’s income. “Where there is growing dominance, there is job-shedding and also propensity for anticompetitive behaviour,” she remarked.

Over a five-year period, there had been a 28% increase in field crop production, a 61% increase in production with regard to horticulture, a 30% increase in animal production and an 80% to 90% increase in the net income of farms.

“Our concern, however, is that South Africa is increasingly relying on imports of crops and inputs, such as fertilisers, diesel and mechanisation. This in itself is [reducing the country’s] competitiveness and profitability. We need to address this overdependence on high-input production systems [and] strengthen our competitiveness,” she emphasised, pointing to localisation.

The sector, therefore, should be encouraged to look at how to grow commodities that had the potential to be globally competitive, but in a way that spelt growth for the entire sector, but not the decline of 80% of the productive sector.

Therefore, South Africa’s agricultural sector needed to find a better balance between large-scale and small-scale subsectors, and thus, “we spoke of broadening market participation”.

“The central message of our policy is that our economy is not going to continue to grow if we continue to grow for the benefit of a few, . . . we [need] to broaden the benefits of that growth so that our communities and South Africans as a whole can become more economically active,” Joemat emphasised.

Despite the issues constraining agriculture, Standard Bank head of agribusiness Nico Groenewald remained optomisitic that the sector was well positioned to take advantage of new production and market options.

He noted that the sector was expected to outperform the national economy with almost 5% growth during 2014, adding that, while net farm income throughout agriculture had been under pressure from rising fuel, energy and labour costs, gross farm income had been on a continuously upward trend.

“There is no doubt that it is more difficult to grow in slow economies, but it is certainly not impossible,” he expressed, explaining that, although 2014 had, so far, been a zero growth year for the South African economy and slow growth was experienced globally, there were still opportunities for South African primary producers and agribusinesses to prosper.

He believed that doing well in agriculture always came down to finding a balance – and constantly refreshing the way operations were approached – despite the economic conditions.

To some extent, Groenewald pointed out, the growth of the sector was attributable to people still needing to eat during economic downturns.

Land Reform
Refering to the organisation’s land reform proposal, Möller cited the Agri SA meeting as “a watershed congress”. Impressed by the proposals, Minister of Rural Development and Land Reform Gugile Nkwinti said he had come here to persuade the Agri SA Congress to buy into land reform but instead found that it was no longer necessary, adding that there was no indication that a “revolution was going on” at Agri SA.

Nkwinti explained that he had been tasked by President Jacob Zuma to coordinate Outcome 7 of the Medium-Term Strategic Framework, which was based on Chapter 6 of the NDP and dealt with comprehensive rural development, and proposed that Agri SA’s technical task team (TTT) join his inter-Ministerial task team.

Agri SA’s TTT convener Sandy La Marque presented the organisation’s land reform proposal, which was formulated in light of the Restitution of Land Rights Amendment Bill, which was signed into law in June. This had seen land claims had been reopened for five years to accommodate people who did not lodge claims during the first five-year process, which closed in 1998.

Agri SA and its affiliates pledged to support sustainable land reform and development under sound business principles, while upholding the Constitution.

“To achieve this, Agri SA looks to forging relationships with role-players and stake- holders at all levels with the view to encourage voluntary land reform and rural development, thereby, broadening participation in commercial agriculture. A well-implemented and successful land reform and rural development process will lead to a stable, viable and profit- able agricultural sector, which, in turn, will aid in unlocking agricultural development opportunities of communal and undeveloped areas. This will further ensure that the national objectives of food security, job creation and poverty alleviation are met,” La Marque outlined.

In this regard, Agri SA intended to diligently investigate economic opportunities to achieve the stated objectives and provide a menu of possible options that could facilitate land reform and development.

The congress called on government to undertake its own crucial role in facilitating land reform and rural development, through investigating special financing options, budgeting adequately for these requirements where needed, providing incentives (financial or otherwise) for voluntary participation and most importantly, providing suitably qualified, capable and motivated staff from a wide variety of necessary disciplines with decision-making capabilities to facilitate and underpin the process.

La Marque said: “We needed to find an approach that was principled, proactive and progressive on rural development and land reform . . . We took into account the commodity-driven approach, which has been very successful, and also on-farm economic development, which many of our farmers have undertaken to date. In essence, we recognise the consequence of indecision and will, hence, pursue a variety of initiatives, catering for the diversity within the agricultural sector to streamline each pillar of land reform.”

Chapter 6 of the NDP provided a useful framework for sustainable land reform, she explained. “However, the NDP did not foresee the reopening of restitution claims. It has not been catered for. How do you participate in the presence of a restitution claim? How will participating owners be protected from future restitution plans, remembering that restitution is rights based. It is clear that a ‘one-size-fits-all approach’ will not work,” La Marque pointed out.

The NDP needed to be inclusive of a variety of models. With respect to restitution, she said the TTT had conducted an in-depth analyses of the South African Human Rights Commission findings, as well as other research, particularly with respect to shortcomings of the restitution model.

“Limited finance for the settlement of claims is very prohibitive. The communal settlement model has shown serious governance challenges. Post transfer support has seen production collapse, owing to the inability to timeously align a comprehensive settlement support, access to finance and equipment skills and mentorship extension,” La Marque outlined.

With regard to the right of first refusal, she suggested piloting conditions before deciding on legislation.

The conditions under which land reform would occur as defined by the land reform review comprised no forced acquisitions, the exemption of certain categories of farmland, the application of timeframes, the formulation of rules with regard to counter offers and that “market value should be a principle that underlines this”.

La Marque also noted the need for a database on all land acquired in this manner, which is constantly updated and will allow the agricultural sector to measure where it was in the process, as well as a special purpose vehicle (SPV).

Roles that could be facilitated by the SPV could include the identification of lands and beneficiaries, access to finance and ensuring the sustainability of projects.

“This is a work in progress and we will be looking to various stakeholders that we are already engaging with [regarding] the possibility of establishing an SPV.”

Agri SA’s land reform review also suggested the establishment of an agricultural social accord, which could include aspects, such as the respect for human rights, the improvement of productivity and enhancing compliance with occupational health and safety.

The debate on land could not be downplayed, but “we can’t be too emotional about it . . . Our vision is to see people not go to bed hungry,” averred Zokwana, adding that Daff had formed a partnership with the DLRRD to ensure that wherever a farm was bought, it continued production.

Groenewald believed the understandings reached and recommendations made during 2014 on land reform issues should stabilise the environment for primary producers and provide both the motivation and the means for job creation and improved labour relations within the sector.

Looking at 2015 and beyond, he said agility would be particularly important, as “new opportunities wrapped up in entirely new challenges” were about to present themselves, highlighting that growing market insistence on green approaches and green outputs would require reassessment of many operations.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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