OPINION: SA must build sustainable agriculture value chains during Covid-19 pandemic
JOHANNESBURG - For the first time since global crises like World War II and the Great Depression global output will drop, per capita income will fall in most countries globally, net private flows will likely turn negative; and trade is expected to decline due the economic downturn precipitated by the Covid-19 pandemic.
This is the likely macroeconomic scenario facing the world economy, including the agricultural and agri-food sectors. In response to this unenviable, yet inevitable, global economic meltdown, a number of governments have passed stimulus packages and other measures that aim to preserve domestic industries and jobs, and sometimes discriminate against foreign producers (e.g. by local campaigns and local content laws in manufacturing). It is plausible to anticipate that we will see more of these interventions as nations grapple with the deleterious effects of the corona virus pandemic.
The period of the pandemic presents a liminal space or transitional space for global economy. Liminal or transitional spaces are transitional or transformative spaces. They are the waiting rooms between one point in time and space and the next. There is no doubt that we are on the verge of something new. This is a threshold moment – a time between the “what was” and the “what will be”, a place of transition and a season for and not knowing. Such liminal spaces present an opportunity to rethink everything.
The South African agricultural sector cannot simply sit around thinking “when life goes back to normal” because there is will be “normal” as we have known it. This Covid-19 pandemic has thrust the world into a liminal space where change is inevitable. We are caught between two worlds: the one we knew six months ago and the one that is to come.
Thus, we cannot go back to “life as it was”. The South African agriculture sector has to reinvent itself and become more agile and fit-for-purpose.
The agricultural value chain is fundamental to the survival of human society, the growth or maintenance of regional and national economies, and the wealth and welfare of individual producers (read farmers). Sustainable supply, particularly in a dynamic and uncertain environment, is a major challenge and there have been very few more challenging times than now. Climate change, natural resource degradation, societal demands, global markets, and the ongoing pandemic all place untold pressures on agricultural supply. It is time for the agricultural sector in South Africa embrace resilience and sustainability in this liminal space more than ever before.
The Covid-19 pandemic has exposed the folly of being overly depended on external value chains for a nation’s essential supplies. The scarcity of Personal Protective Equipment is a case in point. Despite South Africa having a well-developed and sophisticated agricultural system, the sector is still heavily reliant on imports for important inputs such as fertilizers, pesticides, herbicides, agricultural machinery and others. This undue reliance on imports for inputs leaves the sector vulnerable to exogenous shocks where imports become unavailable or unaffordable to exchange rate factors and weakened general terms of trade.
Paradoxically, the South African agricultural industry punches above its weight when it comes to exporting several agricultural products such as fruits, wine and meat. In order, for the South African agriculture to improve or least maintain, its presence in world markets, it is imperative that we develop internal capacity to produce most of the essential inputs that we are currently importing.
The Covid-19 pandemic has given impetus to the need to develop internal agro-processing capacity to foster a more competitive agri-food sector. Furthermore, the agricultural value chains need to be disrupted and shortened in order to support more benefits accruing to the farmers in value chain.
Currently, the existing agricultural value chains are highly concentrated – dominated by few big players, convoluted and exclusive in their nature or by design. The barriers to entry for new players in the agricultural are very high thus perpetuating the status quo. South African policymakers, in collaboration with agribusinesses, need to take decisive steps and be purposive in integrating previously excluded players in the agricultural value chains.
This envisaged integration would go a long way in creating wealth for black farmers and rural folks, thus contribute to addressing the scourge of inequality in South African society.
The government needs to be unapologetic its endeavours to develop a new crop of commercial farmers through the land reform programme and concomitant support instruments.
These include, but are not limited to; directing a significant portion of the R1.2 billion stimulus package earmarked for the sector towards small-scale and land reform farmers.
The government should also look at appropriately supporting financial institutions, particularly the Land Bank, to ensure that farmers have access to finance appropriately structured to the needs of the sector.
The time has come to take bold economic decisions to support local agricultural production, especially for products that the country has been relying on imports to meet its demand.
These bold decisions should be taken even if they are unpopular to bolster South Africa’s ability to fend for itself while being a responsible member of a globalised society. There is even policy space within the framework of the World Trade Organisation General Agreement on Tariffs and Trade, which South Africa is a signatory. There is no need to throw the proverbial baby with the bath water in our bid to comply with international treaties.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; [email protected]