SOUTH Africa would struggle to develop vibrant agriculture and agribusinesses beyond the existing areas if poor service delivery by municipalities was not addressed, the Agricultural Business Chamber (Agbiz) warned yesterday.
Agbiz chief economist Wandile Sihlobo said that farming and agribusiness played a crucial role in sustaining local economies and small towns.
“We see a different pattern where the municipalities fail to provide basic services to their communities and businesses,” Sihlobo said. “These are services such as water and sanitation, electricity, good roads and technological infrastructure."
Agbiz said that governance and service delivery failures directly affected the functioning and efficiencies of farming and agribusinesses in small towns, and when they reached unsustainable levels, some agribusinesses move out.
Sihlobo said that a case in point was the recent announcement by Clover that it would close its cheese factory in Lichtenburg because of “ongoing poor service delivery” by the local municipality.
He said the consequences of this decision on the sustainability of the town were yet to show.
“Some supplied various input solutions to the company. And the income from these activities would have supported many other businesses in the community, so the multiplier effects are likely to be large. Therefore, the closure of the firm in such a town will likely have negative spillover effects across the local economy,” he said
In its report, “The impact of municipal infrastructure in basic service delivery in South Africa”, the Development Bank of Southern Africa (DBSA) wrote that poor service delivery and general poor government services led to the decline of resources, zero job opportunities, job losses and overall poor living conditions. It said that service delivery issues in South Africa began with the lack of adequate infrastructure.
“We’ve come to learn that poor economic and social infrastructure delivery is due to poor planning. For example, there have been numerous low-impact projects identified which are implemented but bear no significant results, leaving service delivery challenges to remain,” the DBSA said. “There are also instances where projects get implemented, but would later become dysfunctional due to lack of supporting infrastructure or due to poor planning.”
Sihlobo said the failures of municipalities were not unique to Lichtenburg and did not only affect Clover and the community in the town.
“We have also recently learned of the Astral Foods case where the Standerton municipality failed to provide water and electricity service to the firm’s operation. This led to a disruptive impact on Astral’s operations, which subsequently had financial implications. The efficiency and economic sustainability of agribusinesses, which is impacted by the poor service delivery of the municipalities, also affects the level of investment the businesses could continue to make in such towns. Importantly, this may affect even the very sustainability of agribusinesses as some might incur more costs, as they try to self-provide the services that were supposed to be the municipality's job.”
According to Agbiz, the farmers had to contend with a similar challenge, directly and indirectly. It said the agribusinesses provided a range of solutions and market access to local farmers, and if agribusinesses’ sustainability was threatened, the farming community also suffered. More directly, the poor roads, and the unreliable electricity and water supply directly impacted the profitability and sustainability of farming operations. Importantly, these were all entities that provided job opportunities to the least skilled South Africans and indirectly sustained the communities around the small towns.
Sihlobo said that some of the practical interventions could be ensuring that a municipality had competent management and required qualified financial officer, qualified civil and electrical engineering services, proper billing, a non-corrupt mayor and councillors.
Moreover, the Financial and Fiscal Commission recently argued that municipalities needed to look closely at their wage bills so that salaries did not crowd out money for critical service delivery functions, such as waste removal, waste management, sewerage systems, roads and water provision.
“These improvements need to happen simultaneously and not before or after agriculture revitalisation, which the Agricultural and Agro-processing Master Plans will support. Importantly, the beneficiation of agriculture (locally) can only happen if the towns are functional. The same for agribusinesses: they cannot operate if the basics are not in place. This is a challenge that the South African government should face head-on, and success in addressing these challenges would also mean the survival of many small towns across South Africa,” Sihlobo said.
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