South African food security linked to innovation, improving productivity in agriculture

2nd December 2021

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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South Africa's food security is linked to the competitiveness of its agricultural production. Therefore, improving productivity through innovation and global best practices will support food security amid challenges such as climate change, and local electricity and water supply constraints, as well as logistics challenges, outgoing agricultural business organisation Agricultural Business Chamber (Agbiz) CEO Dr John Purchase has said.

Providing an overview of agricultural business in South Africa during the launch of Agbiz/Industrial Development Corporation Agribusiness Confidence Index for the fourth quarter of this year, he gave the example of how higher maize yields from 2 t/ha to 5 t/ha over the past two to three years has enabled South Africa to maintain its competitiveness, compared with Brazil, although both were below US yields.

This enabled the industry to maintain its competitiveness and remain a net exporter, and trading export parity is slightly below international prices owing to the costs of logistics to export. The competitiveness of this sector of the agricultural industry allowed higher value-adding agricultural sectors, such as meat and poultry, to also remain competitive, produce food at a relatively cheap price and make it available to the population at affordable prices.

"Competitiveness is one of the key pillars of food security and we must keep driving productivity improvements. This is true of almost all agricultural sectors," Purchase said on December 2.

The work Agbiz does, especially with the Agriculture and Agroprocessing Masterplan (AAMP) initiative, is to ensure food security and the competitiveness of the agricultural value chains, he added.

The South African agricultural sector managed to grow investments, productivity and value, and increased its exports during the year. In 2018, South Africa exported $10-billion worth of agricultural products, and Agibz is confident this will reach $11-billion for 2021, and achieve a trade balance surplus of $5-billion.

"The sector is garnering attention from government because this competitiveness underpins the rand and food security. But can we sustain this? If we do not have specific interventions into agrofood systems and address constraints, such as electricity, water and logistics costs and barriers, the industry will not grow and remain competitive," said Purchase.

INDEX FINDINGS
Agbiz chief economist Wandile Sihlobo highlighted that the turnover subindex improved by ten points to 92 owing to a good 2020/21 season harvest in field crops and horticulture, and higher commodity prices for grains and oilseeds.

"Importantly, this large harvest coincided with sustained higher prices. South Africa is well integrated with global markets and benefitted from these prices. The higher prices may partly offset some of the rises in input costs, including 30% higher fertiliser and 40% higher agrochemicals costs, which is one reason why the net operating income subindex increased by one point to 85 in the fourth quarter," he said.

The export volumes subindex increased by six points to 79 owing to the sizable harvest from the field crops and horticulture and cooperation among the logistics stakeholders and Transnet in facilitating exports, as well as normalisation in export activity.

Further, the employment conditions subindex, while showing a drop of 4% between the second quarter and the third quarter, improved by two points to 62 during the fourth quarter, with around 829 000 people employed in primary agriculture. This employment figure is 3% higher than fourth quarter of 2020, Sihlobo said.

"Besides indicating that about 5% of working people are employed in primary agriculture, employment remains above the long-term average of the past ten years," he said.

The employment subindex benefitted from general improvement in agricultural activity, including from favourable rainfall and the estimated 5% year-on-year improvement in summer crop plantings, as well as a general progressive improvement in horticulture production, he highlighted.

Surprisingly, the capital investment subindex rose by 22 to 79 points, which is its highest level since the second quarter of 2014, and is evidence that money is being spent in the sector. Most of this spending is in consolidation of the sector and movable assets, such as tractors and combine harvesters.

"When looking at the trajectory, the bigger crops and higher prices have improved finances of agribusinesses that are spending on machinery. Most capital investments are being made in movable assets rather than in long-term fixed investments, apart from horticulture, which has seen investments especially in citrus," he said.

The overall Agribusiness Confidence Index improved from 67 in the third quarter to 74 in the fourth quarter. A level above the neutral 50-point mark implies that agribusinesses are optimistic about operating conditions in the country, he said.

"The results reflect the favourable outlook about the 2021/22 production season. The higher commodity prices, combined with the excellent weather outlook on the back of a La Niña event, are conducive to agricultural activities and could help farmers offset the higher input costs that farmers incurred at the start of the season.

"We were concerned that the higher input costs would discourage planting in some areas of the country, but all the high-frequency data point to the opposite. Farmers are boosting plantings and taking advantage of the favourable weather conditions and attractive commodity prices," said Sihlobo.

All subindices were above the 50 mark, which indicates the health of the South African agricultural sector.

Agbiz expects the sector to grow by 6% to 7% this year, following on from the 13.4% growth in 2020 and the growth is building on a good base. Importantly, Agbiz expects the sector to sustain growth of 3% in 2022, and predicts a period of sustained, good activity to the end of next year, Sihlobo said.

The index's fourth-quarter results present a picture of a sector poised for another year of positive growth if weather conditions remain favourable and the logistics remain fairly operational for export markets.

However, several challenges, including inefficient biosecurity, such as animal disease and hygiene that are key for facilitating exports; enforcement of the Agricultural Products Standards Act; and labelling of food produce persisted, Sihlobo said.

Additionally, the Fertilizers, Farm Feeds, Seeds and Remedies Act must be modernised, and rural roads and water infrastructure must be repaired, while the management of water rights allocation must be improved. Similarly, ports and rail systems are crucial for facilitating exports, and cost-effective and reliable electricity supply must be ensured, he said.

"Logistics is key for agriculture, especially for export of agricultural goods. Rail infrastructure is a critical linkage to ports and vital for the export market, especially for the horticulture industry," said Agbiz head of legal intelligence and CEO designate Theo Boshoff.

Exports by the horticulture industry are expected to grow by 51.5% by 2030. Despite capacity constraints of logistics, the agricultural export sector is doing well, but efficiency is vital for export competitiveness. The constraints and logistics challenges must be addressed, he said.

Similarly, service delivery and rural municipalities' health must be improved. Municipalities are critical because they are the operating environment of agribusiness. Various public and/or private methods to address the deficiencies in services and infrastructure quality in municipalities must be explored to address this, Boshoff said.

"These are fundamentally the areas that agribusinesses operate in and something we have to look at to reverse the declines in rural areas," he emphasised.

"South Africa must understand the agricultural value chain and the bio-based value chains, such as food, beverages and fibres, because they are continuously evolving. South Africa must modernise and develop its food systems, driven by, among others, aspects such as global consumer trends, traceability, environmental and sustainability requirements, and recommendations from the United Nations Food Systems summit, to remain competitive," said Purchase.

Further, successful development of rural economies requires an integrated development approach that combines opportunities into a comprehensive development programme, he said.

He based this sentiment on the 'Anticipated Futures for Modern Rural Economies' study by International Food and Agribusiness Management Association researcher Gerhard Schiefer, published in International Journal of Food System Dynamics.

"The study provides a basis for conceptualising modern rural economies by dealing with food, bio-based value chains, and providing for the valorisation of ecosystem services regarding future conditions for rural entrepreneurship, including agriculture, remote areas, including coastal areas, and urban-rural integration. This is what we are trying to achieve with the Agriculture and Agroprocessing Masterplan," he highlighted.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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