Redistributive policy

South African agriculture: The new policy is promising, but there are also repairs to be made

Beyond the vagaries of the weather and the impact on crops, the coming year offers a series of promising developments, as well as increasing difficulties if the problems are not resolved.

On the upside, the impending launch of an agriculture and agribusiness master plan, as well as a possible launch of the Agrarian Reform Agency.

Both initiatives will require the participation of the private sector to be successful. So far, the process of developing the master plan has been done in collaboration with all the social partners (businesses, workers, community and government). This cooperation should extend to practical implementation. The Agrarian Reform Agency will also need support from the private sector, especially once it is established and begins to operate.

On the other hand, the first dark cloud on the horizon for the sector is the poor state of the local municipalities. Continued deterioration will have devastating repercussions.

This could thwart efforts to roll out the master plan and pose a risk to agribusinesses, wider agriculture and other sectors of the economy. The same goes for logistical infrastructure, particularly rail, which is under attack, jeopardizing export-oriented sectors such as agriculture.

Political priorities

The main focus for the sector in 2021 was the agriculture and agribusiness master plan. It is a social pact program that aims to increase agricultural production, broaden the inclusion of black farmers and strengthen the competitiveness of the sector. This should be launched in the first half of this year. The success of the implementation will depend on the adherence of all social partners.

So far, the plan has been discussed mainly at the national level. But the implementation will be at the provincial and municipal level. The priority for government should be to ensure that local structures have a solid understanding of the division of responsibilities.

The debate on land reform will continue to be part of the political discussion this year. First, the Land Reform and Agricultural Development Agency, which President Cyril Ramaphosa first mentioned in his 2021 State of the Nation address, could be launched in the first half of the year. This agency will likely focus on land redistribution. This is another critical area that requires private sector collaboration.

Second, the ruling African National Congress (ANC) will hold its policy conference this year. One of the contentious issues that emerged from the last conference was the adoption of a political resolution of land expropriation without compensation, with specific qualifications, such as ensuring that the policy does not negatively affect the economy. and food security during its implementation.

This policy did not gain support in the National Assembly in December 2021. In my opinion, this was a favorable result. Nevertheless, the ANC is likely to revisit the issue. The outcome of the policy conference is therefore worth watching as it will have implications for the agricultural sector and agribusinesses.

Fix what’s broken

Municipalities in South Africa have become increasingly dysfunctional. This adds to the cost burden for agribusiness in some towns where farmers have assumed public responsibilities such as road maintenance and water supply.

Improving local governance will be a key area to watch. This goes hand in hand with poor road infrastructure, which places an additional burden on agribusinesses, as some products are highly dependent on roads. Take the grains and oilseeds industry. In this subsector, about 80% of the products are transported by road.

Functional infrastructure and efficient logistics are essential to the country’s ambition to open export markets to countries such as China, India, Bangladesh, Japan and Saudi Arabia, among others. Over the past year, the government has had success selling pears in China, but the goal is to expand access to a range of products.

This will require solving the country’s logistical problems, particularly rail and port efficiency. Here, the government could increase the focus on security given the vandalism of rail infrastructure. This could involve an increase in the deployment of police and crime intelligence personnel.

With regard to port facilities, the public service Transnet has signaled its openness to discussing collaboration with companies. This is a welcome development. The efficiency of South African ports has declined. World Bank research ranks South African ports among the least efficient in a ranking of 351.

Other capacity areas also need to be addressed. For example, the media suggests that Onderstepoort Biological Products, a state-owned South African animal vaccine manufacturer, is hopelessly inefficient. This is a major risk given that the institution is responsible for the production of vaccines for livestock. It is therefore essential to the sustainability of South Africa’s vibrant livestock industry.

The aim should be to restore its capacity and invest in improving infrastructure.

Another institutional reform issue that matters enormously in the agricultural sector is the Land and Agricultural Development Bank of South Africa (Land Bank). A new board of directors was put in place to stabilize the institution following its liquidity problems. The bank remains one of the pillars of the South African agricultural economy and is expected to play a key role in financing the sector, thereby supporting transformation and sustainability.

Strong institutional capacities will be even more necessary as the agricultural sector adapts to a new set of regulations under the European Green Deal. The European Union’s new ‘farm to fork strategy’ is designed to ensure that agriculture, fisheries and the whole food system contribute effectively to reducing greenhouse gas emissions.

The consequence for South African farmers is that this will lead to additional compliance costs that will likely offset the benefits of existing preferential trade agreements.

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