OPINION: Window of opportunity to facilitate change and spur growth
Opinion / 2 November 2017, 8:30pm / Philippa Rodseth
JOHANNESBURG - A recent Statistics SA (StatsSA) report noted that “after two consecutive quarters of decline, the country’s economy spluttered back to life in the second quarter of 2017”.
StatsSA said one of the key contributors to the up-tick was agriculture.
It said higher stocks of maize and wheat had begun to ease prices, with bread and cereal prices falling month-on-month for six consecutive months. One of the areas to be resolved is the interplay between the government and private sector involvement.
The Manufacturing Circle, which is the voice of this industry, is working actively to bring about a resurgence of manufacturing in South Africa. One of the major pillars of this strategy is the promotion of agro-processing, which has been identified by the Industrial Policy Action Plan, the New Growth Path and the National Development Plan for its potential to spur growth and create jobs because of its strong backward linkage with the primary agricultural sector.
The Department of Agriculture, Forestry and Fisheries established a directorate of agro-processing to complement interventions undertaken by the Department of Trade and Industry (dti), which focuses on supporting the establishment and growth of agro-processing SMMEs.
Agro-processing as a subset of the agriculture value chain requires that the inter-relationships between the two be taken into account when looking to the sector to facilitate economic development.
An example of agro-processing is the apple grower which not only adds value to exports of fresh apples by the application of phyto-sanitary and protective packaging, but also beneficiates the apples to produce apple juice concentrate for use in a number of food processes.
To achieve these goals, certain questions need to be answered. Should the government intervene or leave agriculture to free market forces?
Where does the government funding go? Should the government determine prices or own farms? Is the government providing an enabling environment through subsidies, incentives and co-ordinated policies and regulations? What are the key priorities?
How important are backward and forward linkages in agro-processing and value chains? How is the private sector facilitating structural transformation? Are large, established companies prepared to assist emerging small businesses?
We believe co-ordination and collaboration, particularly between farming and manufacturing, is required. Alignment of government departments is vital, just as it is in industry across the value chain, from farming suppliers to agro-processors and retailers.
The key value chains within agro-processing need to be competitively enhanced in co-operation with the regulators and policymakers. There should be collaboration on how trade policies are negotiated and non-tariff barriers are addressed.
Key infrastructure, skills development and funding should be part of the discussion. The MC has made recommendations to the dti on agro-processing as it sees the biggest opportunity for transformation and “growing the pie” in this area. The first is to introduce incentives to companies with BBBEE levels lower than 4. Secondly, it is vital that the seasonal nature of these value chains and the length of time to set up new inputs be considered when evaluating funding and incentives, rather than placing onerous and unrealistic conditions on applicants for funding.
In respect of demand pull, locally manufactured inputs should be first choice in the farming value chain to enhance competitiveness. We would like the dti to provide large incentives, such as tax reductions or links to SPP and the Jobs Fund, for game-changing interventions. We are investigating the apple juice concentrate value chain represented by three of its members, and the potato value chain represented by another two members.
It continues to work in a collaborative manner with the dti to encourage a partnership between the government and the private sector to include smaller producers in the agro-processing value chain and will have positive implications for growth in the sector, transformation and job creation.
Philippa Rodseth is chief executive of the Manufacturing Circle.