Industry experts say South Africa can generate more than 1 million jobs and livelihood opportunities in the R300-billion agricultural sector, and tap into huge opportunities in export markets over the next decade.
“Agriculture is an important sector that directly contributes approximately 2.5 per cent of GDP,” says Roux Wildenboer, sector head for Agriculture at Absa. “When all upstream and downstream linkages are considered, it is estimated that agriculture directly and indirectly supports 12 per cent of the country’s GDP. This is particularly relevant in the rural areas of South Africa, where the agricultural sector is often the largest employer and source of economic activity.
The sector directly employs 780 000-820 000 people (it varies between seasons). A substantial portion of this employment occurs in areas where there are few other employment opportunities. The sector also, despite the pandemic, showed growth of 13 per cent and 8 per cent in 2020 and 2021 respectively, with export of agri products averaging at approximately R156-billion in 2020 and R188-billion in 2021.”
National Agricultural Marketing Council chief economist Sifiso Ntombela adds thought that, “while the current Russia-Ukraine war could affect agricultural trade, the sector can grow in the medium to long-term if the government increases investments in emerging farmers and promotes growth in fast-growing export sectors.”
Industrial policy expert Nimrod Zalk adds that as South Africa searches for interventions that could generate large-scale employment, effect structural and racial transformation, and grow exports, a fundamental opportunity to realise these objectives is hiding in plain sight. “There is a large-scale, but overlooked, opportunity to promote the growth of a range of high-value agricultural products that are both labour intensive and export oriented.”
Many agricultural sub-sectors have shown significant growth over the past two decades, especially in export markets. Agricultural volumes have doubled during this period and South African agricultural exports have soared more than 10 times – from R15.8-billion in 2000 to R168.5-billion in 2020. Star performers include apples, pears, oranges, soft citrus and grapes, which have grown exponentially since 2000, according to the Abstract of Agricultural Statistics 2021.
An untransformed industry
The rapid growth in exports received its first boost when the agricultural sector was deregulated in the 1990s and export markets opened up. The deregulation was, however, a double-edged sword as it benefited South Africa’s established farmers who were in a position to capitalise on newly opened export markets, but made it difficult for emerging black farmers to thrive in an industry where the government had withdrawn farmer support. Decades later, the sector is still struggling to transform and bring a greater pool of black farmers into export-oriented crop farming.
Ntombela laments that there has been very little support given to emerging farmers. “There are about 2.3 million household farmers, according to Statistics South Africa. Imagine what would happen if we supported half of them? We saw what is possible with the Presidential Employment Stimulus, which provided grants to 50 000 farmers: although good rains helped, we have had the second-largest crop ever. We also have about 300 000 emerging farmers, who have the potential to become commercial farmers. The Land Bank could create an instrument to de-risk their operations.”
Wildenboer agrees and adds that while we need commercialisation, we also need interventions and strategies to improve access to finance, seed, technology, and knowledge for the small-scale farmer. This can only be achieved if input suppliers, governments, finance institutions and off-takers develop models that can serve small farmers. Farming is risky, and this will require risk sharing, in various degrees, between the governments, DFIs, input suppliers and off-takers.
In terms of industry growth, Ntombela sees huge opportunities over the next decade in fruits, nuts, soybeans, cotton and mohair. “Many high-value brands such as Gucci and Louis Vuitton use South African mohair. As we revive our clothing industry through the Retail-Clothing, Textile, Footwear and Leather Master Plan, there could be increased demand for cotton.”
Betting on blue
Blueberries are also touted to be a big winner as demand for this superfood continues to grow locally and worldwide. But rising input costs could put a damper on profits, slowing down the expansion of this labour-intensive industry. Louw Pienaar, a senior analyst at the Bureau for Food and Agricultural Policy (BFAP), notes that global prices are set to increase slightly in the medium term, as demand for the berries continues to grow amid a slowing down of global supply. “Considering big expansions in Peru and Chile, South Africa’s room for growth is largely dependent on what the South Americans end up producing. Blueberries are, however, growing in popularity among high-income households in South Africa, presenting a stable market, albeit one sensitive to price shocks.”
Not just a nut
South Africa has also become the world’s largest producer of macadamia nuts, with a market share of 26 per cent. The industry exports 97 per cent of production, with the value of exports growing from just under R1-billion in 2010 to R4.5-billion in 2019, and employs more than 10 000 permanent workers.
However, this year was the first in over a decade in which macadamia prices paid to farmers decreased. This symbolises a saturation of the market, indicating that growth in this industry has perhaps reached its peak. Many exporters are nevertheless of the opinion that the price decline represents a greater opportunity within the industry – that of value adding and product development.
Roelof van Rooyen, director of Marquis Macadamias, says that since macadamia nuts only make up less than 5 per cent of the global nut basket, there is much room to grow consumption. “However, investments in product development like ice creams and chocolate bars will only come when big food companies can be assured of a consistent supply of quality product, at stable prices. The tripling of the global macadamia nut crop in the next 10 years, along with slightly softer prices, creates the perfect environment for product innovation. This means future farmers can still reap the rewards of macadamia nut farming.”
Pick the right crops
Zalk says South Africa is dominated by land- and capital-intensive field crops and livestock that employ less than one person per hectare, with many sub-sectors employing as few as 0.02 workers per hectare. However, deciduous and citrus fruits, fresh vegetables, berries, nuts, papayas, bananas, avocados, pumpkins, tobacco, tomatoes and flowers are 80–160 times more labour intensive.
BFAP estimates that around 200 000 jobs could be created mainly through expanding the production of export-oriented, high-value products, says Ntombela. “The largest tracts of potentially arable land lie in former homeland areas – where unemployment and poverty are almost endemic – particularly the Eastern Cape, Limpopo, the North West and parts of KwaZulu-Natal. The multiplier effect on up- and downstream manufacturing and service industries could create an additional 1 million jobs. Export-oriented horticultural products such as fruit are high value, generating the highest returns per unit of land relative to other agricultural commodities.”
Key challenges
Agriculturalist and Land Bank board member Andrew Makenete says that while there is a need to focus on export crops, the infrastructure constraints at Transnet, whose rail network and ports are preventing South Africa from taking full advantage of the export opportunities, must be addressed. “These export industries also need access to water. We have to find a way to award land and water rights together to new entrants.”
Water is possibly one of the biggest constraints to expanding these high-value export crops, even among those who do have water rights. New low-flow drip irrigation technologies could, however, be a game changer, as these systems allow for a far more efficient use of water than older sprinkler systems. Michael Esmeraldo, agronomy manager at irrigation company Netafim, notes that low-flow drip irrigation could reduce water usage by 30 per cent. The lower pressure also means that irrigation systems do not require large amounts of electricity and booster pumps.
The finance question
While new technologies go a long way toward solving on-farm problems, the greater climate in which emerging farmers need to operate still presents challenges. Financing models have not been able to successfully overcome the diversity of challenges in this landscape. Since higher-value crops require a higher level of investment, this is an area of particular concern.
Makenete believes that the Land Bank needs to be refinanced and change its financing structure. “It cannot raise all its finance on capital markets and pay market rates to fund its developmental mandates. There has to be a dedicated grant allocation from the fiscus that can be blended with private capital. There must be transparency in the funding of development mandates so that the public knows what it is paying for.”
Wildenboer adds that what the sector needs is sound policies and governance, and prioritising physical and non-physical infrastructure. “Obvious measures to assist the sector include:
Allow for genetically modified seeds, especially for grains production;
Cut the red tape and allow for policy measures to ease imports and exports;
Prioritise investments into agricultural research aligned with the country’s natural production opportunities.”
Experts are in agreement about the sector’s potential and the obstacles in the way of accelerating its growth and creating jobs, Agriculture, Land Reform and Rural Development Minister Thoko Didiza must finalise the long-awaited industry master plan to unite all stakeholders around a common vision for the future of agriculture.
