SA can unleash agriculture’s growth potential says Agricultural Business Chamber’s Chief Economist

This is according to Wandile Sihlobo, Chief Economist of the Agricultural Business Chamber of South Africa. Sihlobo explored the role of the AAMP in South Africa’s recovery and growth story during the latest PSG Think Big webinar. The series, facilitated by award-winning journalist, Alishia Seckam, examines some of the most pressing issues impacting South Africa’s economic development.

Reflecting on whether the master plan is still fit for purpose given the heightened level of local and global challenges in the operating environment, Sihlobo asserts that it’s doable; however, it needs to be adjusted and treated as a recovery plan. As we adapt and move forward in the current context, he highlights that many of the issues addressed in the plan has become a lot more complex over the last year.

The master plan hopes to unlock 10% to 15% growth in gross value added and to create roughly one million jobs in the primary agriculture and agro-processing sector. “But it will require close collaboration between all the stakeholders who came together to co-create AAMP – government, labour, private sector and communities – to explore opportunities for all the high-value commodities,” he said.

When evaluating the impact of geopolitics – most recently the US and SA tensions – the importance of trade came into focus. He made it clear that exports need to increase to grow this sector and for AAMP to reach its targets; however, for exports to increase, production must expand.

As an export-oriented sector, it’s important to maintain trade relations with our most important markets, or we run the risk of running at a loss. Sihlobo breaks down the composition of the $12,8 billion in agricultural exports according to market size. At 40%, the African market receives most of South Africa’s agricultural exports. Roughly 27% is Asia, 20% goes to the EU, the UK is at 4%, and the US is about 4%. Russia is fairly insignificant at around 2%. “So, although the US is an important market for us, the EU is the primary market that we want to nurture a relationship with,” emphasises Sihlobo.

When we look at expanding production and facilitating enhanced trade outputs, Sihlobo explains that the master plan also seeks to unlock currently under-utilised land. “We think the South African government currently has close to four million hectares of land. Some of it is agricultural and can be brought into full production and nearly two million hectares of that land has already been audited by the Agricultural Research Council. To put it into perspective, South Africa currently plants about 4.3 million hectares of summer grains and seeds. That number can be increased substantially, for grains, horticulture, and livestock, leading to better output for exports and job creation in the process,” notes Sihlobo. At present South Africa exports just over half of its produce in value terms, which equates to $12,8 billion in 2022.

Shifting to domestic challenges and how the AAMP supports the agricultural sector in overcoming them, some issues that took the spotlight were poverty and loadshedding.

When asked about how South Africa can reconcile the issue of food security, Sihlobo points out that although the sector exports roughly 51% of the food that it produces, this creates the funds for vital sector input needed for items such as fertiliser, certain chemicals and seeds. He also points out that just because we are exporting roughly half of what we produce in value terms doesn’t mean that consumers are left without supplies, or that the exports are resulting in an unusual increase in domestic prices. “The poverty issue that the country has comes from unemployment, so even if you were to drop the price of a food item, if someone has no income, that will still be too expensive for them,” says Sihlobo. He further adds that a large part of the problem is also the infrastructure constraints that are curbing the supply to locals – referring to the roads, electricity issues, and water.

Evaluating the impact of load shedding, Sihlobo points to irrigation usage. The primary agriculture sector irrigates 100% of fruit and vegetables and a third of field crops. About a third of the income generated in agriculture is directly linked to irrigation. And that’s excluding poultry, dairy and other agri-industries.

To address this risk, the Department of Agriculture has tabled a capital investment initiative, called the Agro Energy Fund, which encourages farming entities to subsidise a portion of their loan to put towards generating their own power through a range of renewable energy solutions. Private sector players have been invited to participate in the fund to support farmers, but Sihlobo says before the master plan can be implemented, there are important steps that Agriculture Minister Didiza must take, one of which are all social partners must be gathered to evaluate the sustainability of the energy plans for the sector going into the next season.

He says once those elements are in place, we can look at the AAMP and identify the commodity-by-commodity interventions, that needs to be put in place at a regional level and establish who should take what part in the implementation process. “I think this approach will move us forward, it will ensure we grow the agricultural pie and that we have new players coming in using resources that are currently underutilised.

Sihlobo concludes, “I see a vibrancy in the agri-processing and business space that can generate the jobs that we so desperately need. Although this policy is not a perfect one, it is supportive of growth in this sector, and that’s what we need to focus on.”

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