Solutions that will lead to sustainability and return on investments in the agricultural sector lay in looking at the issue in the sector holistically, says Francois Strydom, CEO at Senwes.
Speaking on Day 1 of the at the Agbiz Grain & Oilseeds Value Chain Symposium running from 5 - 8 September this year, he said that it should be borne in mind that anybody who has a business in South Africa has a choice to move that business to any other locality and they will do that on international competitiveness. “I think the low hanging fruit in South Africa is energy. We are energy deficient and that is a huge problem to every part of our economy. If we do not fix that businesses will flow out of South Africa to other localities,” Strydom said.
He added that the infrastructure of the country’s critical corridors of which there were 5 (Durban, Richards Bay, East London, Cape Town and Saldanha Bay) needed to be fix urgently. Those included rail, roads, pipeline and key site investments.
“The third thing is on criminality. If you do not regulate, organise and discipline society, allow criminal activity, all the negative effects of that will occur not only causing cost increases, when it gets to personal insecurity, people will move. That is a political thing and we have this opportunity to next year to change the political scene. It is important that every voter should think carefully what is happening and how through the political system, because clearly, what is happening now, no South African cannot agree that we are going down the hill. How do we change that? Those are the three short term solutions. Longer term one's include education and others.”
Tom Meintjes, the Vice-chairperson of Agbiz Grain said looking at the food value chain internally in South Africa, competitiveness was high at the moment but there was a cap on certain things. He said if the country would uncap that and change that a bit, the free-market would operate within that and new solutions would come forth.
“Farmers have the ability to change overtime making South Africa competitive in world terms in certain crops and other South African products. To keep up that productivity we need to be innovative on how we need the infrastructure to work. That is the beginning of it. And then we need a free-market that will sort out everything. If we are not competitive in South Africa, we are producing in a global market. If we say we can import products but cannot necessarily import products. We can rely that we will import, but we have to produce it ourselves,” Meintjes said.
“For me it is in the cost structure. We must be certain that we do not limit and chase capital away. We must ensure that there is attractiveness in every aspect of the value chain. If we are not competitive locally, then we will import the food but it will not be necessarily imported and always available. So we have to fix it within South Africa.”
Theo Vorster of Galileo Capital, who was also the facilitator of the dialogue said SA had a well functioning agricultural system around grain that delivers a quality product at an affordable price, that was healthy and that people could plan along. “However that does not mean we need to continuously look at enhancing the efficiency of that system. That system needs to be able to grow and attract investments as and when required. It also means that the structure of that system should be allowed in an environment where the market and capital dictates where and what capital is invested because if you start to move that around, that is allocation of capital or capital decisions around, so that way you will weaken the system and somewhere it will bite you. I am very hesitant to create structures that inhibit it. Having said that, there needs to be a set of rules,” Vorster said.
He said the point of departure was that the country has a well functioning value chain. “We rather should should spend time enhancing that and trying to make it as efficient and competitive as possible.”
Professor Ferdi Meyer (BFAP) said the grain value chain system was effective, great, but not ideal as there were always elements but it was a lot better than what other parts of the world and continent boasted. “Once you lose that, you struggle to get it back. A lot of the value chain that we are doing in countries up north, getting private sector investment back once it is gone is very difficult. We need the private sector investments to address the transformation in the country, to move the country forward which requires the private sector and government to work together,” Meyer said.
He added that the sector could not have the disconnect and needed to try and find opportunities in this competitive environment where they could build the transformation. “So if the margins are so tight, there is no investment, there is even less chance for anyone that is coming in new to invest or be part of the value chain. There are collective refinements required but certainly not changing things in terms of the private sector, in terms of the private sector playing a leading role regarding investment is very important.”
Vuyo Mpumza, Commodity Derivatives Manager at the Johannesburg Stock Exchange (JSE) said they appreciated the role storage operators play in the industry. He said the way they safeguarded goods in the silos and guaranteed the quality of the product. “We need to be very careful of the whole market to come together and discuss these points and say what are the solutions going forward. The JSE is open, we are there to listen to the whole market and when they submit that extensive research, we will assess it and through the process of saying now go to a market consult.”