OPINION: The role of SOE's in the transformation of SA agriculture
JOHANNESBURG – There is consensus that the South African agriculture sector is dualistic by design and highly unequal.
South Africa boasts a highly developed and somewhat efficient large-scale commercial sector dominated by a few historically favoured individuals juxtaposed with a fledging small-scale sector predominately black and most on traditional land.
There is also an emergence of a new breed of black farmers largely on government-owned land through the Land Reform programme.
While the large-scale commercial sector is endowed with vast tracts of land and is highly mechanized – thanks to years of affirmative action by the erstwhile government, the small-scale sector, largely, has no title deeds to the lands they farm and are resource-poor.
There can be no doubt that there is an urgent need redress these past imbalances, thus the need for transformation of the South African agricultural sector.
It is not enough to give land back to the majority who were historically disadvantaged and dispossessed of their land, although it is a noble pursuit.
Thus, access to land is a necessary, but not sufficient pre-condition to meaningful participation in the agricultural value chains.
A number of other support measures is required for the creation of a critical mass of entrant farmers into the sector.
This support includes, but is not limited to; access to finance, capacity-building, access to appropriate technology, access to markets, ad land tenure reforms.
The government has a crucial role to play in facilitating the successful take-off and sustainability of entrant black farmers into the mainstream agricultural sector. Nevertheless, this is not an exclusive preserve for thegovernment, the private sector has a role and a responsibility to raise its hand and lend a helping. However, this article focuses on the role of the state in supporting the emergence of a successful cadre of black commercial farmers as a developmental imperative.
The government recognises the importance of supporting the emergence of commercial black farmers and ensuring the success of the Land Reform programme.
Clearly, success of the Land Reform programme cannot simply be measured by the amount of hectares of land transferred from group to another. Similarly, the Land Reform programme cannot justifiably be vilified because of the failure of some farmers. In a process as complex and involved as the Land Reform programme there is bound to be casualties along away.
The failures thus far should provide lessons learnt and could be fairly considered as sunk costs and the school fees that the South African society had to pay.
Having the past 25 years or so as hindsight, we should now move with speed to engender transformation within the South African agriculture sector.
The government can and should deploy state-owned entities (SOEs) that it has at its disposal as levers for agricultural development and transformation.
The main SOEs at the forefront in the South African agricultural sector are the Agricultural Research Council (ARC), Land Bank and the National Agricultural Marketing Council (NAMC).
There are others, such as the Onderstepoort Biological Products (OBP), Perishable Products Export Control Board (PPECB) and the Office of the Valuer General (OVG).
The first three entities can spearhead the resurgence of the South African agriculture sector in the aftermath of the Covid-19 pandemic and beyond.
However, these SOEs should be resourced properly to deliver on the remit of developing and transforming the sector.
Agricultural R&D will play an even bigger role in agriculture and the agri-food sector going forward.
There is no doubt that during the lockdown and restrictions on movements, farmers have been innovating in order to in business even with less than ideal labour complement.
The farm of the future will increasingly be hi-tech and reliant on cutting-edge innovation and technology in order to remain viable and competitive in a highly dynamic environment.
Organisations such as the ARC will need to become even more agile and responsive in order to remain relevant to the sector’s future trajectory. One can envisage increased collaborations among research institutions, including various universities that are also involved in agricultural R&D.
Thus, there is huge scope for mutually beneficial partnerships and collaborations rather than cut-throat competition for the available resources for R&D. Furthermore, the application of the innovations developed is more important than the basic research involved.
SOEs, in the ilk of the ARC, are thus better placed to facilitate innovation and technology transfer to farmers and the agri-food sector where their applications are sought.
Institutions like the Land Bank and the NAMC are also indispensable in the process of transforming the South African agricultural sector. For example, it is virtually impossible for the agricultural sector to strive, or even survive, without access to finance.
Agriculture, by nature, is highly seasonal with income only coming in at the end of a particular season after marking of produce. Thus, there is a period of financial distress and lack of liquidity. This period of limited liquidity is often obviated by borrowed finance.
In South Africa, the Land and Development Bank was established to provide finance to the agricultural sector, hence the name. However, the bank often finds itself between a rock and a hard place.
On the one hand, the bank is expected to extend credit to farmers, especially emerging black commercial farmers at favourable rates. On the hand, the bank sources its finances from the open market like commercial banks thus, unable to charge below market interest rates. Thus, the increasing call for the Land Bank to be appropriately supported by its shareholders.
The NAMC has a vital role in promoting market access for the agricultural sector, both domestically and internationally. Markets play a crucial role in the success of any farming enterprise thus market access and information are imperative components of transforming the sector.
The NAMC also plays a crucial role in the South African agricultural sector through the provision of market information and advice to both the Minister of Department of Agriculture, Land Reform and Rural Development (DALRRD) and the agricultural sector at large (directly affected groups).
Such advice can be used to protect the South African agricultural sector against unfair competition from imports – where such has been established.
In a nutshell, the transformation of the South Africa agricultural sector in a non-negotiable and the agricultural SOEs, together with DALRRD, are besieged with the transformation imperative.
A caveat is that the South African government has reiterated that transformation should not be at the expense of economic development and food security in the country. Thus, there are sacrificial lambs on the altar in the form of the established commercial sector.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; [email protected]