Agricultural sector key contributor to employment in uncertain economic times
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Following the State of the Nation Address by President Cyril Ramaphosa, Statistics South Africa released a bombshell by announcing that the unemployment rate in South Africa has risen to 32.5 percent and youth unemployment jumped to 60 percent.
Agriculture, usually the doyen of the South African economy in terms of contribution to employment, has not been spared the blushes.
Employment in the agricultural sector fell by 8.5 percent in the third quarter of the year compared to the same time last year. A year before (October – December 2019), agriculture employed 885 000 people and this number dropped to 810 000 for the period October to December 2020.
The reduction in employment figures in the agricultural sector should be seen as temporary and the situation is expected to improve in the last quarter of 2020/21 going into the new financial year. The anticipated recovery will come on the back of the harvest season for field crops, in line with the bumper harvest that is expected.
Furthermore, the beginning of winter will bring with it a hive of activity in the winter crops and horticultural sectors. It should be borne in mind that the horticultural sector is a major contributor to employment in the agricultural sector.
Having said this, should be noted that although the agricultural sector has been punching above its weight in terms of employment creation, this cannot continue in perpetuity. As the economy matures and advances, the contribution of agriculture to employment will experience a decline commensurate to its contribution to the gross domestic product – particularly for primary production and as the sector modernises.
This caveat should be taken in the proper context. The agricultural sector has extensive backwards and forwards linkages throughout the economy and is a forex earner of note through significant quantities of exported products. Thus, the economic role and contribution to employment of the agricultural sector should be seen beyond the farm gate.
This then advocates for the South Africa to have a holistic and comprehensive value chain approach to understanding the pivotal role that agriculture plays and will continue to play into the future. Therefore, agro-processing and the food and beverage sectors should be viewed as extensions of the agricultural sector and part of the sector’s economic contribution.
For the linkages between primary, secondary and tertiary agricultural production to function optimally, investment in research, technology and innovation is crucial. To date the South African agricultural sector has been succeeding on the back of research and development investment of the past, and a renewal and increase of investment into agricultural and the entire agri-food sector R&D is long overdue.
Given the country’s resource limitations, prioritisation is always prudent. Therefore, the development of new and better crop cultivars of important crops such as soybeans and maize should be given priority, especially given that these crops are also important to other value chains such as poultry, piggery, dairy and beef as basic feed ingredients. It is notable that South Africa still imports the bulk of its soybeans, making it uncompetitive in poultry production compared to Brazil, the EU and US because of high feed costs.
It should be noted that issues of food safety and other quality standards are of paramount importance to the continued success of the agricultural sector, and as such can pose as barriers to entry, especially in the lucrative export markets, if not adhered to. Adherence to non-tariffs restrictions such as phyto-sanitary requirements can present exorbitant and prohibitive transaction costs, especially for new entrant farmers in the mainstream agricultural market.
The prevention and control of notifiable pests and diseases is equally important. This has been demonstrated time and time again by animal products export bans due to outbreaks of diseases such as foot-and-mouth, ban on citrus exports as a result of black spot and other pests, etc.
This predicament justifies the importance of public agricultural and food research and development as a public good that creates an enabling environment to placate the vagaries of the formal markets, domestic and international, albeit sometimes whimsical and frivolous requirements.
South African agricultural products are highly competitive in international markets, despite having to compete with highly subsidised producers of the northern hemisphere. South African farmers are not subsidised as South Africa is a signatory of the World Trade Organization’s General Agreement of Trade and Tariffs (GATT) and adheres to it to the letter.
The EU region and US subsidise their farmers to keep them in business. The EU uses a policy instrument known as the Common Agricultural Policy, while the US uses the Set-Aside Policy and others such as procurement for school nutrition programmes.
One is not necessarily advocating for a departure from the GATT regulation and the start subsidising South African farmers, although there is still ample room to do so within the confines of the GATT under the Amber and Green Boxes, as they are known. What is being advocated here is the creation and maintenance of a conducive business environment through the provision of agricultural research and development to adequately support the sector.
It would be foolhardy to allow the deteriorating public expenditure on agricultural research and development to continue unabated while simultaneously expecting the agricultural sector to maintain its productivity, thus competitiveness, and to meaningfully accommodate new players in the space, including farming and agribusiness.
In a nutshell, South African policymakers need to make hard policy choices in the face of dwindling national resources and competing priorities. What cannot be denied is that the agricultural sector is the doyen of the South African economy and should be treated as such when it comes to funding – not as a pariah.
Dr Thulasizwe Mkhabela is an experienced agricultural economist and is group executive: Impact & Partnerships at the Agricultural Research Council; [email protected]
*The views expressed here are not necessarily those of IOL or of title sites
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